Crown Paints' Rights Issue
The first such rights issue at the Nairobi Securities Exchange since 2016
Welcome to the Baobab Weekly by Mwango Capital, a capital markets newsletter that brings you a succinct summary of key business news items from East Africa.
This week we cover Crown Paints’ rights issue results, Ethio Telecom FY 2021 results, and Tanzania’s corporate bond.
Our newsletter this week is brought to you by:
Questworks. Questworks engages in engineering, procurement & construction. They were recently engaged in the construction of a 98MW PV Solar project in Eldoret, Kenya with superb results. They are also building Alkira Residences, an upscale development in Nairobi. Reach them via their Co-founder Tim Kipchumba and find them on Twitter.
Crown Paints’ Rights Issue
New shares commence trading: The paint manufacturer raised Kshs 642.7m from its rights issue against an advertised amount of Kshs 711.8m, representing a 13.74% oversubscription rate. 64.3m new ordinary shares were issued at a ratio of 1:1. The fully paid new shares began trading at the Nairobi Securities Exchange on Thursday, 15th July 2021.
Share price: The counter lost 9.82% to close at Kshs 22.50 on Thursday 15th July 2021 when it commenced trading of new shares. Here is how the share price has performed in the last year:
Mwango Explainer: A rights issue is when a company offers existing shareholders an option to buy more shares in proportion to their existing shareholding. For instance, Crown Paints’ offer price was Kshs 10. Shareholders who participate in a rights issue pay for the additional shares enabling the issuing company to raise share capital. A company would typically offer a rights issue to raise capital which it could use to clear debt obligations, acquire assets, or facilitate expansion.
Proceeds from Crown Paints’ rights issue are expected to be deployed in salvaging its subsidiaries (Crown Paints Tanzania Ltd, Regal Paints Uganda Ltd, and Crown Paints Rwanda Ltd) which have recorded depressed performances in the last few years.
Fun fact: The last rights issue at the Nairobi Securities Exchange was in 2016 when KenGen registered a 92% subscription rate.
Ethio Telecom Results
Strong revenue growth despite unrest: Ethiopia’s state-run telco Ethio Telecom this week released its FY 2021 results for the year ended 30th June 2021. The company reported an 18.4% rise in total revenue to ETB 56.5B ($1.29B). This is despite internet shutdowns following civil unrest in the Tigray region.
“When we started the budget year the internet was shut down and we lost billions because of this. And the crisis in the northern region was something we didn't expect”
Ethio Telecom CEO, Frehiwot Tamiru
About Ethio Telecom: Ethio telecom serves as the major internet and telephone service provider in Ethiopia. In May 2021 the company launched its flagship mobile money service Telebirr, which has attracted more than 6.58m subscribers within two months. As part of the government’s plans to broaden the country's telecoms sector, Ethiopia recently announced the sale of a 40% stake in Ethio Telecom to private investors.
More on Ethiopia: We wrote an article this week in collaboration with Timothy unpacking Safaricom’s entry into Ethiopia. Read it here.
IFC Subscribes to Tanzania Bond
IFC supports housing: The World Bank Group member invested Tshs 2.8B in a corporate bond issued by the Tanzania Mortgage Refinance Company (TMRC) aimed at supporting access to mortgages by Tanzanians. The bond was listed on the Dar es Salaam Stock Exchange on July 15, 2021.
The offer: The 5-year, 10.48% coupon rate bond was the third offer of TMRC’s Tshs 120B Medium Term Note programme. The issue raised Tshs 8.87B against an advertised amount of Tshs 7B representing an oversubscription of 26.8%. TMRC will redeem the 5-year MTN by 2026.
In their own words:
"IFC's participation in the third tranche of TMRC's medium-term note program will support the continued growth of the housing finance market in Tanzania. Additionally, it will enable us to diversify our funding sources,"
TMRC CEO, Oscar Mgaya
"TMRC's medium-term note program is contributing to the development of the debt capital markets in Tanzania and providing alternative investment instruments to institutional and private investors. Increasing access to affordable housing finance, with longer repayment schedules, will make homeownership more attainable for Tanzania's emerging middle class."
IFC's Resident Representative for Tanzania, Frank Ajilore
Markets this Week
In East Africa, Kenya recorded a 1.96% increase with the Nairobi Securities Exchange All Share Index closing the week at 178.65, up from last week's 175.22. Tanzania’s DSE ASI closed at 2,004.91 from last week’s 2,007.02 while Uganda’s USE ASI had a 1.13% increase to close at 1,549.37 from last week’s 1,532.07.
Across Africa, Zimbabwe’s ZSE All Share Index recorded the highest increase in returns last week jumping 7.38% to close at 6,544.59. The Namibian NSX Overall Index recorded the largest decline of 3.47% to close the week at 1,360.05.
What Else Happened This Week?
Kenya Revenue Authority issued a gazette notice to auction Kenya Power transformers shipped into the country 7years ago [Business Daily]. Kenya Power however distanced itself from ownership of transformers in question.
The University of Nairobi, listed as one of the state corporations operating below cost recovery, announced new tuition fees [Business Daily]
Nairobi Securities Exchange plans to introduce day trading by October. Trading sessions at the NSE are held on weekdays from 9:30 am to 3:00 pm [Citizen Tv]
Reopened 15-year and 25-year treasury bonds received bids worth Kshs 116B against an advertised amount of Kshs 60B. Kenya’s Treasury accepted Kshs 79B [Central Bank of Kenya]
The Capital Markets Authority has developed draft regulations for businesses seeking to raise capital through crowdfunding. The Authority is also inviting the public to submit comments on the proposed regulations.
Kenya is expected to pay China $325.6m (Kshs 35.2B) by the end of July. The payment will include a principal of $183.5m (Kshs 19.8B) and interest of $142.2m (Kshs 15.4B) [The Standard]
Prices of petrol, diesel, and kerosene remained unchanged in the latest review by the Energy & Petroleum Regulatory Authority [EPRA]
Following incorporation and registration by Global Partnership for Ethiopia of its local company Safaricom Telecommunications Ethiopia PLC, the Ethiopia Communications Authority granted it a final license [ECA]
Uganda's exports were up 27.7% to Ushs 18T ($5.1B) in the period ended May 2021. Gold earnings stood at $2.24B - about half of the total export earnings - up from $1b in the previous period [Daily Monitor]
Harambee Investment Cooperative Society (HICS) is in talks with African Development Bank (AfDB) for entry into real estate as it seeks to grow its asset base to more than Kshs 1B by the end of the year [Business Daily]
Safaricom was ordered to pay a blind man Kshs 6m for failing to hire him after taking him through all the recruitment steps [Business Daily]
CIC General Insurance launched a 24-hour claim self-service provider portal for Garages and Assessors [The Star]
Sidian Bank received a Kshs 515.9m credit guarantee fund from the African Guarantee Fund to increase its lending to small businesses [Citizen]
Kenya Airways launched its new Time to Think service, a feature that allows customers up to 21 days to make payments on booking a flight [The Star]
Unaitas secured a Kshs 1B facility from Oikocredit International for its SME Support Fund geared towards socio-economic growth in the Agri-business value chain, SMEs, and the Trade Sector.
Kenya Revenue Authority extended the date to comply with the Value Added Tax (Electronic Tax Invoice) Regulations, 2020 to 1st August 2021.
118 scholars from Equity Bank's Equity Leadership Program class of 2020 received undergraduate scholarships to 56 global universities valued at over Kshs 1.44B.
Bamburi Cement and Sasini paid dividends of Ksh 3.0 and Ksh 0.50 respectively this week. Here is a list of other upcoming dividend payment dates for the month of July:
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