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Satchu's Rich Wrap-Up
Wednesday 02nd of October 2013

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Macro Thoughts

Home Thoughts

Wouter said, 'Aly-Khan You always write about Hannah. And what about
the other Girls?'

And I thought the thing is this. Even when I know I am being played
and the Older Girls will look at me in disgust and say,

''Dad Are you really this stupid?''

And I want to turn and say

''But Don't You understand I am the centre of Hannah's World at this
moment? And I never want to be anywhere else.''

read more

Kenya's president told Somalia's leaders on Tuesday to "put their house in order"
Law & Politics

"If their desire is for Kenya to pull out of Somalia, my friends, all
they need to do is what they should have done 20 years ago, which is
put their house in order," Kenyatta told religious leaders at a
multi-faith prayer meeting.

"Let me remind them that it is they who, having had enough of killing
themselves in their own country, decided to come and interfere in
Kenya," Kenyatta said. "We did not go there, they came here."

"I want to be categorically clear: We will stay there until they bring
order in their nation," he added.

When @BarackObama picked up his phone in the Oval Office on Friday to
bid farewell to @HassanRouhani with the Persian phrase Khodahafez
(“God be with you”) there was the sense that a tectonic shift between
Washington and Tehran was taking place


The history of US relations with Iran is littered with missed
opportunities, almost always rejected for misguided domestic reasons
on the part of either Iran or the United States. While it is
regrettable that the current discussions are starting ten years late,
both presidents seem to recognize that they are now urgent. The
dramatic change in tone is an important first step and was unthinkable
before this year’s Iranian election. But words are no longer
sufficient. Both sides are preparing their presentations for the first
serious negotiation of the new era in Geneva just two weeks from now.
We shall see.


There has been a clear Inflexion Point in the rhetoric from both sides
and at times it has felt very choreographed. The Linguistics speak to
a rapid Rapprochement between @BarackObama and @HassanRouhani and the
Crude Oil Price [a very effective Geopolitical Barometer] has
retreated  nearly 10% in September.

The President's Tone has been very gracious and i think @BarackObama's
intent is seen in his graciousness because the Iranians are a prickly

It is not generally realised just how hard-nosed Obama can be when
pursuing The US National Interest. The c21st Toolkit that he brought
to bear on Iran, Psyops, Cyber, Financial cutting the Legs from
underneath Iran's most faithful and Loyal Ally Warfare might well have
been decisive in bringing Khamenei to the Table.

President Obama is as much in a Box as is Ayatollah Khamenei. They
will both have to play Houdini to take this further because There are
many who are invested in the Status Quo.

Aly-Khan Satchu

read more

Law & Politics

@BarackObama knows how to ward off such pressure by adopting a stance
of strategic ambivalence which by now has become his trade mark


read more

Cold War Redux: Washington Turbo-Militarizes China’s Backyard -
Law & Politics

Washington’s objective is to build a Cold War-style security ring
around China by deepening military partnerships with American allies
in Southeast Asia while broadening its capacity to police vital trade
and energy chokepoints. Around 80 percent of China’s oil imports pass
through the Straits of Malacca in addition to much of its freight
trade, and the deepening US presence being established by the Pentagon
is designed to limit China’s access to energy and raw material in the
event of a major conflict or political crisis.


That is a Fact.

read more

Currency Markets at a Glance WSJ
World Currencies

Euro 1.3521  Euro touched $1.3588 yesterday, the highest since Feb. 6
Dollar Index 80.19
Japan Yen 97.73
Swiss Franc 0.9062
Pound 1.6174
Aussie 0.9368
India Rupee 62.615
South Korea Won 1074.26
Brazil Real 2.2156
Egypt Pound 6.8922
South Africa Rand 10.1380

Dollar Index 3 Month Chart INO 80.19 [Proving very resilient given
the circumstances]


Dollar Yen 3 Month Chart INO 97.73

Euro versus the Dollar 3 Month Chart 1.3521

“We are ready to use any instrument, including another LTRO if needed,
to maintain the short-term money markets at the level that is
warranted by our assessment of inflation in the medium term,” Draghi
said in response to questions from lawmakers in the European
Parliament in Brussels on Sept. 23


Draghi continues to do his best to cap the Euro's rise.

read more

Commodity Markets at a Glance WSJ

Gold 1 Year Chart INO 1291.47 [Breaking down again]

Gold futures for December delivery fell 3.1 percent to settle at
$1,286.10 on the Comex in New York at 1:38 p.m., the biggest drop
since July 5. Earlier, prices touched $1,282.40, the lowest since Aug.
8. Trading was 19 percent above the average in the past 100 days for
this time of the day, data compiled by Bloomberg show.

Crude Oil 6 Month Chart INO 101.56

West Texas Intermediate fell for the ninth time in 10 days. WTI for
November delivery declined as much as 58 cents to $101.46 a barrel in
electronic trading on the New York Mercantile Exchange. It was at
$101.55 at 1:35 p.m. Singapore time. The contract yesterday slid 0.3
percent to $102.04, the lowest close since July 3.

US accounted for 21 percent of global oil consumption last year,
according to BP Plc’s Statistical Review of World Energy.


More than anything I think its the @HassanRouhani @BarackObama
Rapprochement and the Step Back in Syria which has deflated the
Geopolitical Premium.

Emerging Markets

Frontier Markets

read more

“This is our Arab Spring, this is the African Spring,” Ahmad, an activist with the main demonstration movement Girifina — or “We’re Fed Up

As people demonstrated last week, the country’s National Intelligence
Security Service (NISS) began “shooting to kill…. by aiming at
protesters’ chests and head,” Lucy Freeman, Africa Deputy Director at
Amnesty International said.

South Africa All Share Bloomberg +15.03% 2013

Dollar versus Rand 6 Month Chart INO 10.1380

Egypt Pound versus The Dollar 3 Month Chart INO 6.8922

Egypt EGX30 Bloomberg +6.37% 2013

Nigeria All Share Bloomberg +34.28% 2013

Ghana Stock Exchange Composite Index Bloomberg +69.67% 2013

read more

Kenya says 2013 Q2 GDP growth at 4.3 pct - stats office Reuters
Kenyan Economy

Kenya's economy expanded by an annualised 4.3 percent in the second
quarter of this year, a fraction slower than the 4.4 percent recorded
a year earlier, official data showed on Tuesday.

The Kenya National Bureau of Statistics said growth was driven by the
agriculture, manufacturing and financial sectors, while the hotels and
restaurants sector posted a 11.4 percent contraction due to political
uncertainty around March's presidential election.

Kenya’s currency advanced 0.3 percent today to 85.82 per dollar, its
strongest level since July 2, and extending its gain since the day
before the Sept. 21 raid on a shopping mall in Nairobi to 1.8%


“The shilling is a bullish signifier that this is a very resilient
economy in the face of such an event,” Aly-Khan Satchu, chief
executive officer of Nairobi-based Rich Management Ltd., said by phone
yesterday. “The performance of the shilling speaks to a lot of demand
for Kenyan assets.”

Tourism revenue fell to 96 billion shillings ($1.1 billion) in the 12
months through June from 103 billion shillings a year earlier as
visitors stayed away before and after elections in March

“The attack didn’t necessarily erode broader market confidence because
security challenges are to an extent embedded in the political risk
scenario,” said Nema Ramkhelawan-Bhana, Africa analyst at FirstRand
Ltd.’s Rand Merchant Bank in Johannesburg.

Kenya Shilling versus The Dollar Live ForexPros 86.151

Safaricom closed at a Record yesterday of 8.70 and is +72.27% 2013
share data here


Par Value:                  0.05/-
Closing Price:           8.70
Total Shares Issued:          40000000000.00
Market Capitalization:        348,000,000,000
EPS:             0.44
PE:                 19.773

FY 2013 Earnings through 31st March 2013 versus FY through March 2012
FY Revenue 124.287856b versus 106.995529b +16.2%
FY Gross Profit 67.743420b versus 52.856310b +28.2%
FY Operating Expenses [40.643226b] versus [32.704953b] +24.3%
FY PBT 25.450565b versus 17.369400b +46.5%
FY PAT 17.539810b versus 12.627607b +38.9%
FY EPS 0.44 versus 0.32 +37.5%
FY Dividend 0.31 cents a share +40.9%
Cash and Cash Equivalents at End of Period

Company Commentary

Customer Numbers have increased +1.8% to 19.42m [1.4m Customers were
disconnected in this Period]
Mobile Data Customers who were active in the last 30 days increased by
56.7% to 7.13m as at March 2013
M-Pesa Registered Customers grew by 14.8% to 17.11m as at end March 2013
Voice Revenue +12.6% to 77.66b
SMS Revenue +30.4% to 10.13b
Data Revenue increased by +27.8% to 8.42b
M-Pesa Revenue +29.5% to 21.84b
M-Pesa/SMS/Data Revenue increased to 32.5% of Total Revenues from 29.2%

Further Commentary
FY 2013 Voice Revenue now 65.8% versus 68.8% previously of Total Revenue
FY 2013 M-Pesa Revenue now 18.5% versus 16.8% previously of Total Revenue
FY 2013 SMS Revenue now 8.6% versus 7.8%
FY 2013 Data Revenue now 7.1% versus 6.6%
1.2m Customers using M-Shwari
Giving Free Cash Flow Guidance for FY 2014 of between 15.5-17.5b Kenya Shilling


These Results have exceeded the Top End of Consensus Expectations. FY
Revenue of 124.287856b +16.2%, FY PBT of 25.450565b +46.5%, FY PAT
17.539810b +38.9%, FY EPS 0.44 +37.5%
and a +40.9% Dividend Hike to 0.31 cents a share is a Tape that You
cannot argue with. The Dividend Yield of 4.46% is high and handsome in
particular in a World where Everyone is hunting for Yield. The Growth
Curves look attractive and Note Well that Data grew +27.8% even after
a very sharp Tarriff Discount.

I expect New All Time Highs in the share Price.

M-Pesa now contributes 18.5% of Total Revenue Safaricom FY 2013
says @BobCollymore Twitpic


read more

Diageo Kenya Outperforming Nigeria Unit on Push Into East Africa Bloomberg
Kenyan Economy

The push by Diageo Plc (DGE)’s Kenyan unit into the rest of East
Africa is helping the company beat the London-based brewer’s Nigerian
business in the stock market for a second year.

East African Breweries Ltd., or EABL, has gained 23 percent this year
following a 54 percent advance in 2012. Guinness Nigeria Plc is down 3
percent after increasing 10 percent last year. Even after the rally,
EABL trades at 26 times estimated earnings compared with 27 times for
its West African peer, according to data compiled by Bloomberg. The
outperformance will continue in 2014 as the East African market
develops, said Esili Eigbe, an analyst at Standard Bank Group Ltd.’s
Stanbic IBTC.

EABL is benefiting from its dominance in the beer industry in Kenya,
where it controls 95 percent of the market, and an expansion into
Uganda, Tanzania, the Democratic Republic of Congo and South Sudan.
Guinness, which holds about a third of the nation’s beer market and
unlike EABL doesn’t sell spirits, is trying to stem falling profit by
adding brands to catch larger competitor Nigerian Breweries Plc. (NB)

“There is a lot of headroom for EABL to accelerate earnings growth
relative to Guinness,” Eigbe, who has a buy rating on EABL and a sell
on Guinness, said by phone yesterday from Lagos, Nigeria’s commercial
capital. The Kenyan unit “is the most dominant player in East Africa”
and “very attractive because the market it’s exposed to is pretty
wide,” he said.

Kenya suffered its worst attack in 15 years on Sept. 21 when at least
61 civilians and six soldiers died after gunmen from Somalia’s
al-Qaeda-linked al-Shabaab militia entered the upscale Westgate
shopping mall in the capital. In Nigeria, thousands of people have
died in regular gun and bomb attacks by Islamist militants since 2009
in the north of the country and the capital, Abuja.

“Consumption will not be affected” at EABL because of the assault,
Eric Munywoki, a research analyst at Nairobi-based Old Mutual
Securities Ltd., said by phone yesterday. The company has multiple
brands across Kenya and the region so an attack on a single mall will
not have much impact, he said.

The Nigerian Stock Exchange All-Share Index (NGSEINDX) rallied 30
percent this year and Kenya’s main equities gauge increased 32
percent, the best in Africa after Ghana. That compares with a 14
percent increase in the MSCI Frontier Market index. Guinness rose 5
percent to 266.70 naira on Sept. 30 with Nigerian markets closed
yesterday for a holiday. EABL advanced 0.3 percent to 3.26 shillings

Revenue at EABL increased 6.4 percent in the fiscal year through June
with sales in Kenya and Tanzania rising 10 percent and export markets
jumping 20 percent, the Nairobi-based company said Aug. 23. At
Guinness, annual sales increased 4 percent, the Lagos-based company
said Sept. 16. Diageo, the world’s biggest distiller, declined to
comment on valuations, James Crampton, a London-based spokesman, said
by e-mail Sept. 16 on behalf of all the companies.

Guinness is the West African nation’s largest brewer after Heineken NV
(HEIA)’s Nigerian Breweries. EABL’s spirit business accounts for about
10 percent of sales, providing potential for further growth, Andy
Gboka, an equity analyst at Exotix Ltd. in London, who has a hold on
the Kenyan unit and sell on the Nigerian company, said by phone Sept.

Net income at EABL dropped 38 percent in fiscal 2013 after a one-time
gain last year wasn’t repeated. Profit at Guinness slid 17 percent as
input and operating costs increased.

The valuation on EABL “has run well ahead” and the stock may start
falling, Munywoki, who has an underweight rating on the brewer, said
in an Aug. 27 note. Expenses in fiscal 2012 increased faster than
revenue growth, narrowing profit margins, with rising raw material and
imports adding to costs, he said.

Nigerian beer volumes may increase 19 percent to 24.7 million
hectoliters in 2015, while consumption in East Africa will climb 18
percent to 17.5 million hectoliters, Stanbic IBTC’s Eigbe said by
phone on Sept. 17.

EABL “can catch a beverage consumer at many points,” Fungai Tarirah,
the head of Africa Investments at Momentum Asset Management who
oversees $105 million in pan-African listed equity funds, said Sept. 5
in an interview in London. “Guinness in Nigeria appears to have a more
focused, narrower high-end product range, which allows less
flexibility in tougher economic environments.”

Nigeria’s economy, the second largest on the continent and home to
more than 160 million people, will probably expand 7.2 percent this
year, according to the International Monetary Fund. That compares with
4.5 percent to 7.6 percent in East African Community member countries
of Kenya, Tanzania, Uganda, Rwanda and Burundi, with a combined 148
million people.
Nigerian consumers are under pressure after the government reduced
fuel subsidies last year and inflation reached 8.2 percent in August.
The central bank kept interest rates at a record 12 percent after its
Sept. 24 meeting. In Kenya, the central bank held rates at 8.5 percent
on Sept. 3, pausing for a second meeting. Inflation accelerated to 8.3
percent in September compared with 6.7 percent in August.

Conditions for Nigerian consumers have been “eroded” by the high cost
of loans and removal of fuel subsidies, Guinness Nigeria Chief
Executive Officer Seni Adetu said on a conference call Sept. 18.
Attacks in the north of the country have impeded the business and
hindered the transportation of goods, he said in a June 7 interview

“Nigeria is dominated by Nigerian Breweries,” Exotix’s Gboka said
“People feel a bit more comfortable with the business model of EABL
than Guinness.”

read more

EABL share price data and Earnings Releases here
Kenyan Economy

Par Value:                  2/-
Closing Price:           326.00
Total Shares Issued:          790774976.00
Market Capitalization:        257,792,642,176
EPS:             8.83
PE:                 36.920

FY Revenue 59.061875b versus 55.522166b +6.375%
FY Cost of Sales [31.562560b] versus [28.657047b]
FY Gross Profit 27.499315b versus 26.865119b
FY Other Income 140.54m versus 3.797208b -99.62%
FY PBT 11.114919b versus 15.253049b -27.1298%
FY PAT 6.994745b versus 11.186113b -37.469%
FY EPS 8.83 versus 13.46 -34.39%
Final Dividend 4 shillings a share [Interim Dividend 1.50 a share]
Total 5.50 versus 8.5 Previous Year -35.294%

A Selection of Tweets from the FY Earnings Release

Inline image 1Aly-Khan Satchu@alykhansatchu
EABL #Kenya 67% FY Net Sales Premium Beer +18% RTDs +47% Guinness +20%
EABL Reserve Spirits +276% Premium Spirits +22% Mainstream Spirits
-6.00% Emerging Spirits +32%
EABL FY Net Sales +6% Volumes +3% FY Operating Profit +0.2%


The FY Profits Warning issued on 30th July 2013 forewarned. FY Revenue
of +6.375% confirms the Growth Story is in tact. The Year on Year
other Income comparison was -99.62%. The Previous FY EABL had booked a
3.797208b one off Gain.
The Trailing PE is 34.5 and is now rich.
The +276% Reserve Spirits Acceleration is eye catching.

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@KenyaAirways rallied +5.18% yesterday and crossed 10.00 which is a Major and Bullish Breakout share data
Kenyan Economy

Par Value:                  5/-
Closing Price:           10.15
Total Shares Issued:          1496470000.00
Market Capitalization:        15,189,170,500
EPS:             -6.35
PE:                 -1.598

FY Earnings through March 2013 versus FY through March 2012
FY Revenue 98.86b versus 107.897b -8.3755%
FY Direct Costs -77.725b versus -77.217b
FY Fleet Ownership Costs -11.178b versus -9.970b
FY Overheads -19.469b versus 19.404b
Operating [Loss] Profit -9.012b versus +1.306b
FY Finance Costs -1.907b versus -1.341b
Realised Gain on Fuel Derivatives 602m versus 2.508b
Other Costs -1.930b versus -571m
FY PBT -10.826b versus +2.146b
FY PAT -7.864b versus +1.660b
FY EPS -6.35 versus +3.58
Summary Consolidated Statement
Surplus on Revaluation of Property and Equipment 5.082b
Cash and Cash Equivalents at End of Year 14.393b versus 6.840b

Company Commentary

Referring to Travel Advisories
The Run Up to the Elections in Kenya
Passenger Traffic Growth Trends remain positive in ME Asia Far East Africa
Capacity into Europe reduced 22%
Fuel Costs 38.5% of Total Operating Costs
826m Staff Rationalisation Costs


These Results were telegraphed at the H1 Stage and therefore were a Known Known.
In fact, notwithstanding the tricky H2 Backdrop [Travel Advisories and
the Election Period in Kenya] Kenya Airways posted a material
improvement in the Second Half and pared Costs a great deal, which
positions it for the Rebound.
The Core African Franchise was firm.
Rest of Africa expanded 300 basis Points to 51% for 48%.
Kenya expanded to 6% from 5%.
The Reconfiguration of the Fleet will improve Fuel Efficiency by about
20% and reduce Maintenance Costs.
The AFREXIM Bank $2b Loan [which extended to Financing PDPs] + the
Rights Issue Proceeds means Kenya Airways has enough Cash in hand
which was a concern.
It was a clearly an Annus Horribilis but I feel Kenya Airways is
optimised to rebound hard.

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Reflections on #Westgate, #Samanthalewthwaite The White Widow The @NSEKenya and The Shilling The Star
Kenyan Economy

#Westgate happened more than a week ago and to date there is no Grand
Unified Theory. There are competing Narratives and it is this Pot
Pourri of Narratives which is leaving many of us uncertain. Earlier
This week I characterised it as a BP Moment. Kenya's share of Voice
was at a Level heretofore never experienced. The World's Media was
camped on our Doorstep. I found myself watching the #Live Feed,
trawling Eyewitness Accounts, reading the Al-Shabaab Twitter Handles
[Twitter knocked them down about 4x only for it to bounce back under a
different Handle]. In fact, Al-Shabaab live tweeted #Westgate and the
Cabinet Secretary's Bona Fides was undermined by the real time
rebuttals issued by Al-Shabaab and on Twitter. The latency of the
responses leads to me place the Author of the Twitter Handles on the
scene in #Westgate for an as yet undetermined time.

David Guetta - Titanium ft. Sia

VIDEO: The escape route tunnel used by terrorists after shopping centre massacre

#Westgate from @CNBCAfrica Bureau #Nairobi on the 19th Floor

read more

by Aly Khan Satchu (www.rich.co.ke)
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October 2013

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