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👋 Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week, we cover ILAM Fahari’s conversion offer, the restructuring of NSE indices, and IFC’s investment in Centum RE.
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ILAM Fahari’s Conversion Offer
Highlights: In the week, ILAM Fahari I-REIT released its offering memorandum relating to the conversion of the I-REIT from unrestricted to restricted in a transaction expected to involve redemption by non-professional investors of 36.6M units [20.22% of total units] valued at KES 402M. The redemption’s offer price is KES 11 per unit, an 82.72% premium to the market price as of 25th Aug 2023 when the proposed conversion offer was announced.
Trading at the NSE: Post-conversion, ILAM Fahari I-REIT will delist from NSE’s Unrestricted Main Investment Market Segment subject to approval by unitholders at the Extra General Meeting slated for 16th Nov 2023. The restricted I-REIT units will be quoted on NSE’s Unquoted Securities Platform to allow for limited trading by professional investors. Non-professional investors who would not have sold during the initial offer period can still redeem their units at the KES 11 redemption price before delisting. After delisting, they will still have a 6-month window from the offer’s closing date to redeem their units at the KES 11 offer price.
Financial Snapshot: In the 12 months ended 31st December 2022, rental and related income was up 19.1% to KES 354.3M. Net revenue increased by 26.8% year-on-year to reach KES 336M while other income totaled KES 31M, down 8.7%. The net loss for the period reduced to KES 28M [2021: KES 124M]. Distributable income from current earnings in 2022 edged higher by 39% to reach KES 141.9M.
Performance at the NSE: ILAM Fahari was listed at the NSE in 2015 at a unit price of KES 20. As of the market close last week, the unit price was KES 9.36, up 47.9% over the last 1 year and up 52.4% year-to-date. The closing price represented an appreciation of 55.5% from 25th August 2023. Market capitalisation closed the week at KES 1.70 B.
Find the offering memorandum here.
NSE Indices Restructuring
Introduction of New Indices: The Nairobi Securities Exchange (NSE) has introduced 2 new indices the NSE 10 Share Index (N10) and the NSE Bond Index (NSE-BI), effective 4th Sep 2023 and 1st Oct 2023, respectively. The N10 Index is composed of 10 constituents which will be reviewed semi-annually and is currently composed of Safaricom, Equity, KCB Group, Co-operative Bank Kenya, Absa Bank Kenya, EABL PLC, NCBA Group, KenGen, Kenya RE and Centum PLC. The NSE-BI index will track benchmark listed government bonds and will form part of a fixed-rate future contract to be issued on the NSE derivative market.
NSE 20 Share Index Reviewed: The NSE also introduced changes to the NSE 20 Index by replacing WPP Scan Group, NSE PLC, and Diamond Trust Bank Kenya with CIC Insurance Group PLC, Bank of Kigali Group PLC, and I&M Holdings PLC effective 4th September 2023.
Deals, Mergers, and Acquisitions
IFC’s Investment in Centum RE: The International Finance Corporation (IFC), a member of the World Bank Group, is proposing to invest up to USD 20M in Centum Real Estate Limited’s development of 1,940 affordable housing units in Two Rivers, Nairobi. The total estimated project cost is USD 91M, of which IFC will be financing USD 20M via the loan. The IFC pillar advisory team is using its data-driven, evidence-based Rapid Pillar Business Assessment tool to assess Centum RE’s strengths and opportunities for capacity building.
Kotani Secures Funding: Kotani Pay, a Kenyan crypto payments startup, secured USD 2M in a pre-seed funding round to expand its cross-border remittance solutions in Africa. The funding round was led by P1 ventures, with participation from other investors such as DCG/Luno and Flori Ventures. The startup aims to address the challenges of limited access and high transaction fees by leveraging blockchain technology and stablecoins. Kotani Pay has developed solutions that will enable users with feature phones and no internet access to send and receive money through USSD.
Sanlam-Allianz Joint Venture: Sanlam, a non-banking financial services provider and Allianz, an insurer and financial services provider, have announced that they have received regulatory approvals for their joint venture. The joint venture, which will operate as SanlamAllianz, will have a presence in 27 African countries and is expected to have a combined group equity value of R35 B( KES 266B). The venture will offer a range of insurance products and services to retail and corporate clients, as well as “best-in-class” financial services. South Africa is excluded from the agreement while Namibia will be included at a later stage.
Markets Wrap
NSE: In Week 36 of 2023, Uchumi was the top-performing stock, up 11.1% to KES 0.20. Longhorn was the worst-performing stock, down 16% to KES 2.20. The NSE 20 index rose by 0.2% to 1,541.7 points, the NSE 25 fell by 0.5% to 2548.8 points while the NASI index was up 0.6% to 98.7 points. Equity turnover was down 34.8% to KES 1.2B while bond turnover increased by 42.5% to KES 13.1B.
Treasury Bills: The weighted average interest rate of accepted bids for the 91-day, 182-day, and 364-day were 14.2337%, 14.3686%, and 14.8603% respectively. The total amount on offer was KES 24B with the CBK accepting KES 38.77B of the KES 38.83B bids received, to bring the aggregate performance rate to 161.83%. The 91-day and 364-day instruments recorded 870.79% and 27.81% performance rates, respectively.
Eurobonds: In the week, the yields rose across the 6 outstanding papers this week.
KENINT 2024 rose the most, up by 57 basis points (bps) to 14.072%, while KENINT 2048 rose the least, appreciating by 1.0 bps to 11.315%. The average week-on-week change stood at 11.95 bps.
KENINT 2024 rose the most on a year-to-date (YTD) basis, appreciating by 146.9 bps while KENINT 2048 rose the least at 49.1 bps.
Except for KENINT 2028 which was unchanged, other eurobond prices fell week-on-week, with KENINT 2024 and KENINT 2034 falling the most at 0.3% to 94.803 and 72.442, respectively. KENINT 2027 and KENINT 2048 fell the least at 0.1% to 89.017 and 74.737, respectively. YTD, only KENINT 2024 appreciated, by 2.5%, while other papers recorded price losses. KENINT 2034 fell by 6.5% while KENINT 2027 fell the least at 1.0%. The average price change week-on-week and YTD was -2.6% and -0.2%, respectively.
Market Gleanings
⚖️ | Finance Act 2023 Ruling | This week, the Supreme Court of Kenya dismissed Okiya Omtatah’s petition challenging the Court of Appeal’s decision to lift orders barring the implementation of the Finance Act 2023. The Court found that the Motion did not fall within its appellate jurisdiction and that the issues in dispute would be properly ventilated in the appeals before the Court of Appeal as well as in the amended petition before the High Court. The Court also struck out the four sets of written submissions which were filed out of time on the Court’s online platform.
💰 | More Funds | In the week, two proposed funds came to light. The Unemployment Insurance Fund is aimed at cushioning unemployed people while the Kenya Migrant Workers Welfare Fund is aimed at increasing relief assistance efforts for migrant workers. Here is a list of funds created by the government so far:
Hustler Fund: This fund aims to provide loans to startups, micro, small and medium-sized enterprises (SMEs) and personal loans at an interest rate of 8% per annum.
Housing Fund: This fund aims to finance the construction of affordable housing for low and medium-income earners. The levy is payable at a rate of 1.5% of the employee’s gross monthly salary and 1.5% of the employee’s monthly gross salary by the employer.
Primary Healthcare Fund: The fund will be funded by the national government through the exchequer as part of efforts to accelerate Universal Health Coverage(UHC).
Social Health Insurance Fund: This fund aims to protect all population groups against financial risks due to illness through a monthly premium.
Chronic and Critical Illness Fund: This special fund is dedicated to the treatment of chronic illnesses facing Kenyans including cancer.
Kenya Migrant Workers Welfare Fund: This proposed fund seeks to provide relief assistance to migrant workers, invalidity benefits, medical assistance and survivor benefits when a migrant worker dies. Contributions to the welfare scheme will be mandatory for all Kenyans working abroad.
Unemployment Insurance Fund: The objective of this proposed bill is to provide the payment of unemployment benefits to employees who become unemployed or their beneficiaries, the employee and the employer will contribute to the Fund.
🏦 | Safaricom Secures ESG Loan | This week, Safaricom secured a KES 15B Sustainability Linked Loan (SLL) to support its Environmental, Social and Governance (ESG) agenda. The loan, which is upgradable to KES 20B will help Safaricom to reduce its emissions, track gender diversity and monitor social equity impacts. The SLL’s interest rate is linked to Safaricom’s ESG performance meaning the interest will be lower if it meets its ESG goals and higher if it falls behind. The loan was arranged by four banks led by Standard Chartered Bank Kenya, Kenya Commercial Bank, Stanbic Bank and ABSA Bank Kenya.
🧾 | Tuskys Liquidation | In a notice via the Kenya Gazette, Owen Koimburi Njenga was appointed as the interim liquidator by the High Court in Nairobi to oversee the sale of assets of Tuskys Supermarket. The move comes after the retailer failed to convince the court that it had a viable plan to repay its debts a total of KES 19.7B. Tuskys assets are estimated to be worth around KES 6B which is far less than the amount it owes to creditors. At its peak, it had over 50 stores across the country.