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The East African : July 14th 2014
60 JULY 12-18,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,902.18 0.34% (CUMULATIVE MOVEMENT) 2300 2200 2100 2000 1900 1800 1700 1600 1500 1750 1700 1650 1600 1550 1500 1450 1400 1350 152 147 142 137 132 127 54,000 52,000 50,000 48,000 46,000 44,000 42,000 40,000 38,000 43,000 42,000 41,000 40,000 39,000 38,000 37,000 36,000 35,000 DSE All Share Index Tanzania 2,242.90 0.21% USE All Share Index Uganda 1,755.39 1.18% RSE All Share Index Rwanda 146.23 0.08% JSE All Share Index South Africa 51,123.65 -1.68% NGSE All Share Index 42,832.85 Nigeria -0.45% Insecu≥ity sees Se≥ena, KQ sha≥es lose g≥ound I f there were any doubts about the impact of the recent spate of insecurity in Kenya on the economy, the Nairobi bourse offers the best illustration. Shares of TPS Serena and Kenya Airways, both heavily linked to tourism prospects, have lost ground since January. TPS Serena, which runs several hotels around the country, has shed 19 per cent since January while KQ has lost 22 per cent. Though the majority of the country remains safe, the insecurity at the Coast has seen major tourist source markets such as the UK and the US issue travel advisories that have affected tourism numbers. The UK is the country’s biggest source of visitors. Though the poor perform- ance of the KQ counter could also be attributed to its lossmaking streak, the company has also taken a beating from the advisories. KQ’s CEO Titus Naikuni told an investor briefing last month that the insecurity had brought down passenger numbers on some European routes by as much as 20 per cent. But TPS Serena is largely pay- ing for a sin that it has no direct control over. The company fundamentals remain strong. It has Hotels at Kenya’s Coast have registered low tourism numbers after several attacks in the country saw countries like the UK and US issue travel advisories. Both KQ and Serena have been affected by the low number of tourists flying into the country. Pic: File renovated its hotels to improve on the customer experience. TPS Serena is largely paying for a sin that it has no direct control over — its fundamentals remain strong Last year, tourist arrivals in Kenya fell 15.8 per cent to 1.49 million as security worries kept visitors away. The insecurity has also seen conference organisers cancel and relocate some events to neighbouring countries. The US government is also cutting back on its regional conferences and train- ings in Nairobi. The insecurity has also af- fected jobs. The Kenya Association of Hotelkeepers and Caterers (KAHC) estimates that occupancy levels at the Coast have dropped by between 10 and 20 per cent and that at least 20 hotels associated with the organisation have closed shop due to inadequate guest numbers. Indirectly, KAHC says, the insecurity has contributed to the loss of 7,500 jobs. But things are expected to look up for the two counters. For one, the government has lowered the landing fees at the Malindi and Mombasa airport. It has also exempted VAT for air ticketing and lowered national park fees. With KQ now finally having started to receive the B777 and the B787 planes, the airline is expected to start flying into new destinations particularly in the Middle East and Asia, among the fastest growing markets for Kenyan tourism. Also, the country has back- tracked on a decision that had banned government agencies from holding retreats, trainings or conferences in private hotels. This should offer reprieve for the country’s hospitality industry. Is F≥ench telco O≥ange on its way out of Kenya? ORANGE, THE French telco, seemed to have begun its rumoured exit from Kenya in earnest last week. The French outfit is said to have stuck a deal with the government to recall expatriates it had seconded to its Kenyan subsidiary with their positions expected to be filled by locals. France Telecom had seconded the company’s CEO Michael Ghossein and seven other executives to Orange Kenya. In total, only four out of the 12 senior executives at the company are Kenyans. Details as to who between the government and the French outfit will nominate the incoming executives remain unclear. But the exit of the French is a major decision. They control 70 per cent of the company and thus seceding management control to a minority shareholder was either a strategic decision or government arm-twisting. The latter looks highly unlikely. Under the terms of Orange’s en- try into the Kenyan market, it can only sell out to a company that has a similar level of financial and technical expertise. If the French outfit does even- tually sell, this coupled with the impending exit of Essar from the Kenyan market through the sale of its Yu brand could potentially open a new chapter for the local telecoms industry. For one, Equity Bank plans to launch the country’s first mobile virtual network operator later this month, which could put pressure on the current players. Second, the entry of new share- holders in both Orange and Essar could provide the much need capital that the two have cited as the key weakness in their battle with cash-rich Safaricom. Orange estimates that it needs an injection of up to Ksh30 billion ($342 million). Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Alexande≥ Fo≥bes moves into ≥eal estate ALEXANDER Forbes, the pension fund manager, plans to develop a real estate project as it looks to reduce dependence on equities. The fund manager plans to build 211 maisonettes in Kitengela, some 30km out of Nairobi, which it will sell to its members at concessionary mortgage rates, having already stuck a deal with a strategic partner. The company estimates that less than five per cent of all retirees have a home, a factor that eats into their pension and pushes a sizeable number into old-age poverty. But even as the company moves to actualise the project, pension funds are finding themselves in a interesting dilemma. The valuation of real estate projects has been on growing at a faster rate than projected, which has left fund managers pondering on how to restructure their portfolio to ensure that the real estate share remains within the 30 per cent upper limit.
July 7th 2014
July 21st 2014