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Satchu's Rich Wrap-Up
Monday 29th of February 2016

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Macro Thoughts

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David Bowie

I don't know where I'm going from here, but I promise it won't be
boring. David Bowie

When you think about it, Adolf Hitler was the first pop star. David Bowie

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HistoryKe Some 1936 photos of vintage #Nairobi.

Congratulations Leonardo DiCaprio

“He smiled understandingly-much more than understandingly. It was one
of those rare smiles with a quality of eternal reassurance in it, that
you may come across four or five times in life. It faced--or seemed to
face--the whole eternal world for an instant, and then concentrated on
you with an irresistible prejudice in your favor. It understood you
just as far as you wanted to be understood, believed in you as you
would like to believe in yourself, and assured you that it had
precisely the impression of you that, at your best, you hoped to
― F. Scott Fitzgerald, The Great Gatsby

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Crisis grips North Korea’s Kim as China backs sanctions
Law & Politics

In response to the belligerent moves, thousands of US and South Korean
troops are mobilizing for their annual combined military exercises,
with the stated aim of not only repelling a future attack, but also
decapitating the North’s top command chain in the early stages of a

And at the UN Security Council in New York, China – so far the North’s
economic lifeline and only diplomatic backer – is changing course and
appears ready to back tough US-sponsored sanctions imposing a global
economic and military blockade.

Evidently, this is the gravest crisis facing North Korea’s young
dictator Kim Jong-un (who turned 33 or 34 in January, the North
doesn’t say) since he took power upon the death of his father Kim
Jong-il in December 2011.

While Kim taps such fear mongering to get away with his nuclear
gambits, South Korea is determined to put an end to it. Seoul is not
responding to Kim’s threat to “nuclear fire bomb” the South with a
begging bowl asking for peace talks. On the contrary, it has shuttered
all the factories running inside the North Korean city of Kaesong,
pulling out businessmen and effectively ending the only project
designed to help the North Korean economy. Now, the last surviving
channel of providing hard currency worth over $100 million annually in
wages alone, has been shut down.

Beijing has reportedly agreed on a number of robust sanctions
including ending aircraft fuel supplies (but presumably not other oil)
and imports of anthracite coal from North Korea which alone is worth
over $1.2 billion annually. Coupled with a dollar embargo from Seoul,
removing revenues on this scale could gravely hurt North Korea. (It’s
still not clear if China will send back some 50,000 North Koreans who
work at Chinese factories; this too is a significant income source for
the Kim regime which grabs all of their paychecks.)

China’s agreement to back such broad sanctions comes after a desperate
attempt to keep a US anti-missile defense system from deploying in
South Korea not far from its borders. Though this marks a major shift
in Beijing’s position toward the Pyongyang regime, it’s a reluctant

As for Seoul, it’s not clear at all if it will reverse its agreement
to have a Terminal High Altitude Air Defense or Thaad system installed
in its territory.


The Chinese have hardened their position because they are not keen on
the THAAD being positioned on the Korean Peninsula.

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Terminal High Altitude Area Defense -
Law & Politics

Eerily, the film also shows Qaddafi addressing Arab leaders at a 2011
Arab League summit, and asking, after Saddam Hussein’s execution, “Who
among you is next?”


Gaddafi's Body in a Freezer - What's the Message? 24th October 2011

International Markets

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.0944
Dollar Index 97.89
Japan Yen 112.98 [Target 105.00]
Swiss Franc 0.9963
Pound 1.3894 [Target 1.3650]
Aussie 0.7140
India Rupee 68.545
South Korea Won 1237.97
Brazil Real 3.9955
Egypt Pound 7.8267
South Africa Rand 16.1007

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Negative is new normal: #Japan's yield negative out to 10yrs, 40y yields dropped below 1%. Signals deep econ trouble H/T Holger Zschaepitz
World Currencies

Dollar Yen 3m Chart INO 112.98

Shanghai Comp drops to 15mth low w/ Yuan weaker as investors
disappointed about lack of measures during G20. #China H/T Holger


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Deepening default fears cast shadow over Venezuela's oil flows
International Trade

HOUSTON (Reuters) - As Venezuela grows closer to exhausting nearly
every means of paying its debt, some oil market participants are
seriously pondering the possible implications of an unprecedented
event: the default of a major crude producing company.

State-run firm PDVSA faces around $5.2 billion in payments to
bondholders in 2016, much of it in October and November, a sum that
some experts say it will be hard-pressed to meet after the government
used nearly all of its available cash reserves to pay $1.5 billion in
maturities last week.

A default could curtail some of the OPEC member's exports by crippling
its ability to import crude and fuels used to blend its extra heavy
oil, experts and sources say. It could also degrade the quality of
domestic gasoline by limiting purchases of necessary components.

With the risk growing and payment delays to suppliers already
emerging, some firms that sell to PDVSA have begun hedging their bets
by using intermediaries or seeking higher prices, fearful they might
never get paid, according to sources who deal with the firm.

"A possible PDVSA default is worrying for everybody," a source from a
U.S. oil company that buys from PDVSA told Reuters. And if they scrape
together enough funds to pay off bondholders, "they will not be able
to pay suppliers."

The implications of a default for global oil supplies swamped by the
biggest glut in decades are difficult to divine, but experts are
closely watching the deteriorating finances of exporters for anything
that could jolt markets.

"Of course, Venezuela is at the top of the list," Daniel Yergin, vice
chairman of analysis firm IHS, told Reuters last week.

10-AUG-2015 “The end is nigh’’ for crude oil and oil producers from
Caracas to Luanda, from Riyadh to Abuja

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Caracas Venezuela
International Trade

Striking photos show desperate efforts to control #Zika mosquitos
in the slums of Brazil


Frontier Markets

Sub Saharan Africa

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29-FEB-2016 Africa Markets Meta-Trends and Why Barclays' Exit is a Vote of No Confidence in Zuma @TheStarKenya

I was at a reception given by the British High Commissioner last week,
where the high-commissioner to Ethiopia Gregory Dory posed the

‘’What are the meta-trends?’’ And I thought lets try and bring it all together.

Let’s start with the news announced Friday that Barclays PLC’s chief
executive Jes Staley has made the decision to exit Africa. This
decision surely has not been taken lightly. Barclays has had
operations in parts of Africa for almost a century. Barclays Africa
Group, which includes the South African branch net- work ABSA, is one
of the largest banks on the continent, with a 991 bil- lion rand
(about $67.39 billion) balance sheet. It has 45,000 employees – a
third of all Barclays staff – and 1,267 branches across 12 countries,
including Kenya, Ghana, Tanzania, Mozambique, and Uganda. Many reasons
have been given including the fact that the sale of Barclays Africa
will add as much as 0.8 percentage points to Barclays’ core capital
ratio, that the African unit’s return on equity of 9.3% last year was
below the bank’s target rate of 11%, that Africa translates into
Barclays carrying 100% of the ‘’reputational risk’’ without 100%
control. For example, in South Africa the UK bank has a minority of
board seats. The real reason in my view is the Zuma ‘’Zupta’’
volatility. The Barclays Africa exit is a vote of no confidence in
South Africa’s President Jacob Zuma and by extension in South Africa’s
gateway position. Two days before South Africa’s Finance minister
Pravin Gordhan presented his budget last Wednesday, Zuma described Van
Rooyen as the most qualified finance minister his administration has
had. Unless the president is stopped, Barclays PLC’s move might well
be the first in what becomes an Avalanche of Exits.

Over in Nigeria, we have an artificial naira foreign exchange rate.
President Muhammadu Buhari is seemingly determined not to devalue the
currency. Of course, the parallel market is a more accurate barom-
eter and is trading at a significant discount to the official rate.
For Presi- dent Buhari to pull this rabbit out of the hat, crude oil
needs to embark on a ‘’V-shaped’’ recovery and head straight back to
around $80.00 a barrel. It is not going to happen. The stock market
has retreated 15.41% so far this year and no-one is going to put any
hard currency to work, when they could be facing a more than 35% [at
the least] haircut down the track. The IMF still has a 3 handle for
Nigeria GDP in 2016. That looks like a Hail-Mary call to me, given the
current situation.

Here at home, we are now in the full year earnings season. You will
recall that we have seen about 19 companies (35% of the Securities
Exchange) issue profit warnings. This is at least a 10-year high. The
common thread running through these profit warnings has been FX
impairments. East African Portland was the latest company [they have a
yen-denominated loan and the yen is soaring and I expect it to go
higher] last week to cite FX. What we are in fact watching at the
Nairobi Securities Exchange is a bifurcation. Think of a continuum,
from the left you have dishonesty [there are numerous examples], then
incompetency, then competency and then super competency. As an
investor, you have to be investing on the right hand side of this
continuum. The Nairobi All Share has shed 3.07% year to date, but that
is veiling the continuum. BAT, notwithstanding its challenges which
have caught up a number of reputations, served up 16.95% full year
profit after tax acceleration. Safaricom remains a money-printing
machine and, we know, it has tip-top leadership. Kenya Commercial Bank
is a similar story. EABL’s results confirm they are no slouch. EABL
re-positioned very effectively. KenGen on a trailing P/E which carries
a 1 handle looks interesting and an anomaly.

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Shares in Johannesburg-based Barclays Africa slid as much as 6.8 percent to 135.02 rand, the biggest decline since Jan. 11.

The securities were trading 4.7 percent down at 137.96 rand as of 9:41
a.m. in the city. The company led losses on the seven-member FTSE/JSE
Africa Banks Index, which dropped 2.4 percent.

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Turkey’s Erdogan to embark on major trip to Africa

Turkish President Recep Tayyip Erdogan will visit four west African
countries next week, including Nigeria, his office said Saturday in a
new sign of Ankara’s desire to be a major influence in the region.

Erdogan will began his visit in Ivory Coast on Sunday, before
travelling on to Ghana and then to economic powerhouse Nigeria. He
will wrap up the trip in Guinea on Thursday, it said.

The visit was aimed at deepening Turkey’s “strategic partnership” with
Africa and developing relations with members of the Economic Community
of West African States (ECOWAS), the presidential statement said.

It will be the first time a Turkish president has visited Ivory Coast
and Guinea, it added.

Erdogan, who in January last year visited Ethiopia, Djibouti and
Somalia, is spearheading a drive to expand Turkish presence in Africa.

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Talking Policy: Rafael Marques de Morais on Angola

WORLD POLICY JOURNAL: What is the situation in Angola at the moment?

RAFAEL MARQUES DE MORAIS: The situation is awkward because the country
is in serious economic trouble, with serious shortages of food and
spiking inflation. And yet when you watch the government’s propaganda,
the government's narrative, everything in the country seems to be on
the right path and going OK. So we have these two competing images in
which the state television, the national radio, and the only daily
newspaper projects an image that the country doing great every single
day. And the reality is that you go to shops and you have a scarcity
of milk and basic products. There’s no garbage collection in the city
and now we have an outbreak of yellow fever, and over 70 people have
died—those who have been accounted for by the government. There is a
huge contrast between reality and the official narrative.

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“The ministry of finance can’t become a game of chicken. That is what it is becoming now.’’

Two days before Gordhan presented his budget on Wednesday, Zuma
described Van Rooyen as the most qualified finance minister his
administration has had, a comment that Schrire said meant that the
president “insulted him grossly.”

South Africa All Share Bloomberg -2.49% 2016

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South Africa’s benchmark stock index has been trading below its 200-day moving average for three months.

The last time that happened, in 2008, the index was in a bear market,
falling 46 percent over five months. This time, the gauge has dropped
12 percent from its Nov. 4 peak, and more losses may be in store,
according to Peet Serfontein, a technical analyst at Nedbank Group
Ltd. in Johannesburg. “The 200-day moving average is the major
psychological level,” he said. “So you’ve already got a bearish

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Dollar versus Rand 6 Month Chart INO 16.100

Egypt EGX30 Bloomberg -13.23% 2016

Nigeria All Share Bloomberg -15.41% 2016

Ghana Stock Exchange Composite Index Bloomberg -0.74% 2016

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@KenGenKenya reports H1 EPS +15.179% Earnings here

Par Value:                  2.50/-
Closing Price:           7.00
Total Shares Issued:          2198361344.00
Market Capitalization:        15,388,529,408
EPS:             5.24
PE:                 1.336

Kenya Electricity Generating Company Limited H1 through 31st December
2015 vs 31st December 2014
H1 Electricity revenue 14.757370b vs. 11.658780b +26.557%
H1 Interest income 288.589m vs. 172.452m +67.345%
H1 Other income 3.476785b vs. 0.351469b +889.215%
H1 Total revenue 18.522744b vs. 12.182701b +52.041%
H1 Other gains 143.422m vs. [24.339b] +689.268%
H1 Operating costs [8.659795b] vs. [6.990924b] +23.872%
H1 Finance costs [1.622310b] vs. [1.377296b] +17.789%
H1 Profit before tax 8.384061b vs. 3.790142b +121.207%
H1 Tax [expense]/ income [2.715716b] vs. 1.137646b -338.714%
H1 Profit for the period 5.668345b vs. 4.927788b +172 15. 028%
H1 Total comprehensive income for the period 5.653548b vs. 4.932392b
EPS 2.58 vs. 2.24 +15.179%
Total assets 355.009216b vs. 342.519995b +3.646%
Cash and cash equivalents at the end of the period 2.564076b vs.
[3.440810b] +174.520%

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KenGenKenya Our revenue. #KenGenProfitsH1

@KenGenKenya H1 EBITDA +76% H1 PBT +121% H1 PAT +15% Total Revenue
+52% #KenGenProfitsH1 Other sources of Revenue +888%

KenGenKenya @alykhansatchu sharing w/ our Corporate Finance
Manager at our Half Year Results Announcement event.#KenGenProfitsH1

KenGenKenya Geothermal is our second source of energy with an
installed capacity of 513.8MW. #KenGenProfitsH1


Strong Results confirming the new Trend Line for Earnings.
The Key Challenge around valuation is the level of Dilution around the
rights Issue
Even factoring in a strong dilution its a cheap share

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Unga Group Ltd reports H1 PAT -20.632% Earnings here

Par Value:                  5/-
Closing Price:           35.25
Total Shares Issued:          75708872.00
Market Capitalization:        2,668,737,738
EPS:             5.27
PE:                 6.689

Unga Group Limited H1 2016 through 31st December 2015 vs. 31st December 2014
H1 Revenue 10.519764b vs. 9.651343b +8.998%
H1 Operating profit 492.724m vs. 409.764m +20.242%
H1 Foreign exchange losses [32.626m] vs. [52.088m] -37.364%
H1 Profit before tax 463.892m vs. 376.212m +23.306%
H1 Income tax expense [136.703m] vs. [115.014m] +18.858%
H1 Profit for the period from continuing operations 327.189m vs.
261.199m  +25.264%
H1 Profit for the period from discontinued operations – vs. 151.042m
H1 Profit for the period 327.189m vs. 412.241m -20.632%
EPS 2.83 vs. 3.41 -17.009%
No interim dividend

Company Commentary

Operating Profit improved by +20% over prior year, driven by growth in
sales volumes and further gains in conversion efficiency.
The decline in net Profit for the period is primarily attributable to
the gain in the prior year from the disposal of the Group's investment
in Bullpak limited
Depreciation of the Kenya and the Uganda Shilling against the US
Dollar, resulted in significant foreign exchange translation losses.


The Organic growth story is veiled by the Non Repeat of the One-Off
Gain from the prior year

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Kenya Shilling versus The Dollar Live ForexPros 101.641

Nairobi All Share Bloomberg -3.07% 2016


141.22 +0.32 +0.23%

Nairobi ^NSE20 Bloomberg -4.19% 2016

3,871.62 +4.56 +0.12%

Every Listed Share can be interrogated here

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N.S.E Today

The Nairobi All Share Index rallied +0.57% to close at a 6 week high of 142.03.
The Nairobi NSE20 eased back 9.38 points to close at 3862.24.
Equity Turnover was light and clocked 254.523m.1
The Shilling pushed up 101.64 a Fresh 6 month high.
Kenya's inflation slowed to 6.84 percent in the year to February from
7.78 percent in the previous month, the statistics office said on

N.S.E Equities - Agricultural

Kakuzi rallied +9.66% to close at 329.00.

N.S.E Equities - Commercial & Services

Safaricom firmed +0.62% to close at 16.20 and was trading at 16.30
+1.24% at the Finish. Safaricom traded 1.834m shares and Buyers
outpaced Sellers by a Ratio of 4 to 1.

TPS Serena firmed +9.47% to close at 26.00.

N.S.E Equities - Finance & Investment

The Big News that broke late Friday was that Barclays PLC has made the
decision to exit its Africa Business. Barclays has had operations in
parts of Africa for almost a century. Barclays Africa Group, which
includes the South African branch net-work ABSA, is one of the largest
banks on the continent, with about A $67.39 billion balance sheet. It
has 45,000 employees – a
third of all Barclays staff – and 1,267 branches across 12 countries,
including Kenya, Ghana, Tanzania, Mozambique, and Uganda. I believe
that The Barclays Africa exit is a vote of no confidence in South
Africa’s President Jacob Zuma and by extension in South Africa’s
gateway position. Two days before South Africa’s Finance minister
Pravin Gordhan presented his budget last Wednesday, Zuma described Van
Rooyen as the most qualified finance minister his administration has
had. That comment might well have been the straw that broke the
Camel's back. Unless the president is stopped, Barclays PLC’s move
might well be the first in what becomes an Avalanche of Exits. The
Managing Director of Barclays Kenya Jeremy Awori said;

 "I assure you that your money is safe with us and you should not be
concerned about the operation of your account"

Barclays edged -0.386% lower to close at 12.95 and traded 956,500
shares. Barclays Kenya is -5.14% in 2016 and evidently now in play.

Barclays Kenya share price data -5.14% 2016

CO-OP Bank followed on Fridays +2.31% move higher and rallied a
further +3.098% to close at 18.30 and traded 212,200 shares. CO-OP
Bank is +1.666% Year to date.

N.S.E Equities - Industrial & Allied

KenGenKenya reported its First Half Earnings after the market
shuttered on Friday, where H1 Total revenue surged +52.041% to
18.522744b, H1 Other income spiked an eye-popping +889.215% to
3.476785b  H1 Profit before tax accelerated +121.207% to 8.384061b  H1
Profit for the period clocked a +15.028% gain to 5.668345b [There was
a Tax charge this time around versus a Tax credit last time which
explains the divergence between the Profit Before and after Tax].
First Half Earnings Per Share increased +15.179% to 2.58. KenGen
on-boarded its Geothermal Capacity increase in the previous Full Year
but these 6 month Earnings captured the Geothermal component in full.
KenGen now has an installed Geothermal capacity of 513.8MW These were
Strong Results confirming the new Trend Line for Earnings.The Unknown
Known is the level of dilution proposed via the Rights Issue. One has
to believe this is entirely baked into the Price given that KenGen's
Trailing PE is just 1.336. Kengen closed unchanged at a 2016 closing
High of 7.00 and traded 387,600 shares.

Unga Group Ltd reported First Half Earnings where H1 PAT retreated
-20.632%, notwithstanding an H1 Revenue gain of +8.998%. Operating
Profit increased by +20% but the decline in Profit After Tax was
because of a Non-Repeat of the one-off gain from the previous year via
the sale of the Group's stake in Bullpak limited. The Company also
made the following comment in its accompanying commentary
''Depreciation of the Kenya and the Uganda Shilling against the US
Dollar, resulted in significant foreign exchange translation losses''
This has been a common theme. Investors looked through the Headline
Numbers and at the organic expansion rate and rallied the Price +9.22%
to close at 38.50 a 2016 closing high. Unga is +14.07% Year to date.

BAT which served up a really solid FY Earnings Release last week
popped +6.415% higher to close at a Fresh 2016 High of 846.00. BAT is
+7.77% Year To date.

EABL closed unchanged at 268.00 and traded 293,500 shares.

by Aly Khan Satchu (www.rich.co.ke)
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February 2016

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