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 KCB Group’s acquisition in Rwanda, activity at NSE’s bond market as Acorn’s green bond records an oversubscription, and BAT Kenya’s 2021 half-year results.
Mwango Capital. Mwango Capital provides A+ quality analysis and research on the East African capital markets. Follow us on Twitter, join us on Telegram, check out our website and drop us an email at mwangocapital@gmail.com for any engagements.
Revival times for Kenya’s Corporate Debt Market
Acorn’s Green Bond oversubscribed: The final tranche raised Kshs 2.1B [against a Kshs 1.4B target] recording a 146% subscription rate. The note’s performance comes on the back of Family Bank's 147.3% subscription rate, indicating good signals from Kenya’s corporate debt market.
Mwango Explainer: A green note/bond is a fixed-income instrument designed to raise money for climate and environmental projects for instance renewable energy, energy efficiency, green transport, and wastewater treatment. Proceeds from Acorn’s final tranche will be deployed towards the construction of two purpose-built student accommodation (PBSA) properties in Nairobi.
75% of the uptake was from existing noteholders and 25% from new private investors, says Acorn CIO Raghav Gandhi in an interview with Business Redefined host Julians Amboko.
This is East Africa’s first green bond: In 2019, Acorn issued a Kshs 5B Medium Term Green Note programme, a first in the East Africa region. The first tranche/bond raised Kshs 4.3B and was listed on both the Nairobi Securities Exchange and the London Stock Exchange.
In their own words:
“We see the oversubscription of our Green Bond as a huge vote of confidence for Acorn and the wider Capital Markets especially given the ongoing COVID-19 pandemic. Despite the pandemic, the Acorn Green Bond has continued and will continue to pay coupons promptly due to the appropriate project bond structure that was adopted at the outset." - Acorn Holdings Ltd CEO, Edward Kiraithe
“As a Kenyan Bank, we are honored to be part of such a historic deal. Not only does this demonstrate our overall commitment to contributing to the economic growth of the country, but it also paves way for domestic financing institutions to be part of green financing and have a social impact in the Kenyan market.” - Stanbic Bank Kenya Ltd CEO, Charles Mudiwa
Stanbic Bank Kenya is the Lead Transaction Advisor.
More on Acorn: Acorn has its Income & Development REITs listed on the Nairobi Securities Exchange Unquoted Securities Platform which facilitates the trading of unlisted securities.
At the NSE: Bond Turnover is staging a comeback here. It was up 59% in the first half of the year with investors trading bonds worth Kshs 469.7B in the six months to June 2021 [2020: Kshs 294.6B].
Something more: In emerging markets, there has been a surge in ESG-linked bonds. A record level of these bonds have been issued this year including some by the AfDB.
KCB Acquires BPR
Rwanda regulator approves acquisition: The transaction was awaiting regulatory approval from Rwanda following KCB shareholders’ approval that was granted electronically on May 27, 2021, during the lender's 50th AGM. KCB is seeking to expand in Rwanda by acquiring up to 100% of the issued share capital of BPR.
Mwango Explainer: Issued share capital is the total value of shares held by a company’s shareholders. These shareholders can include institutional and individual investors.
About BPR: BPR commenced operations in 1975 in Nkamba village and was started by a group of Rwandans who wanted access to finance to better their livelihoods. Today the bank has the largest network in Rwanda. BPR is owned by Atlas Mara Ltd, a financial services firm listed on the London Stock Exchange.
Looking ahead: Regional expansions are part of KCB Group’s current strategy of scaling to achieve regional relevance. The bank is also awaiting regulatory approval to acquire African Banking Corporation Tanzania Ltd (BankABC). These acquisitions also provide an opportunity to expand the group’s balance sheet.
BAT Kenya Half-Year Results
Revenue rises, boosted by domestic sales: Gross revenue was up 22% aided by domestic sales volumes, excise-duty-led price increases, and sustained momentum in exports.
Profits rose slightly, dividend maintained: The cigarette maker’s profit rose 0.71% to stand at Kshs 2.7B. An interim dividend of Kshs 3.50 [same as the previous half year] has been approved by the board with a payout set for September 16, 2021. BAT will close its books on August 12, 2021, for consideration of the dividend.
New development: Products containing nicotine or nicotine substitutes will now attract excise duty at the rate of Kshs 1,200/kg as passed in the Finance Act 2021. Finance Bill 2021 as backed by Kenya’s Treasury had proposed Kshs 5,000/kg as the excise duty rate. Previously nil, the new tax legislation is bound to have an impact on BAT Kenya’s revenues.
Nuggets of Wisdom from Twitter Spaces
This week we hosted Daniel Kiragu [Mkulima Young], Paul Njoroge [The Shack], Kennedy Kamau [Kune Foods] & Jacqueline Watahi [Chapati Mistress] on our Twitter Spaces where we discussed the food market space in Kenya. Here are a few lessons and insights from the conversation:
Tech-first or tech enabling? Chapati Mistress first operated offline and then went online (Twitter) to advertise her chapatis. Contrary to popular opinion, you probably don't need tech first. We also learned that tech is expensive for most food entrepreneurs.
Cloud kitchens v restaurants: Consumers are increasingly shifting their dining behavior and as a result, cloud kitchens have grown more popular. The model cuts on overhead costs and enables concentration/focus on the food. Note that it's not a cut-throat battle between cloud kitchen vs restaurants. The restaurants offer a social dining experience and most of their takeaway customers are people who do in-dining while cloud kitchens offer convenience.
Last-mile delivery a real need: Last-mile delivery is a key factor for most businesses plying the food space. Timely and efficient food delivery is crucial in building brand loyalty.
Kune Foods are not here to play: MD Kennedy Kamau unpacked Kune Foods’ business model; from owning the entire chain [own cooking, packaging & delivery] to their low pricing model, and how they are looking to serve a real need in the market. With strong financial backing from its investors and a promise of speedy deliveries [on average 30 minutes], Kune Foods are certainly not here to play. We eagerly await their launch in August.
We awarded ten food vouchers from The Shack Nairobi. Check your emails for the notification. The winner of the big food voucher from Chapati Mistress is fs***t@gmail.com. Check your email for the notification as well.🎉🎉🎉
Join us next week on our Twitter Spaces for another opportunity to win some cool prizes.
Markets this Week
In East Africa, Kenya recorded a 0.18% increase with the Nairobi Securities Exchange All Share Index closing the week at 178.98, up from last week's 178.65. Tanzania’s DSE ASI rose 6.56% to close at 2,136.52 from last week’s 2,004.91 while Uganda’s USE ASI recorded a 1.33% decrease to close at 1,528.69 from last week’s 1,549.37.
Across Africa, Egypt’s EGX30 recorded the highest increase in returns last week - after Tanzania’s DSE - jumping 4.86% to close at 10,646.85. The Mauritian SEM All Share Index recorded the largest decline of 2.13% to close the week at 1,812.31.
What Else Happened This Week?
Nation Media Group’s equity repurchase program has achieved 74.23% of the targeted 20.7 million ordinary shares thirteen days after it kicked off [Mwango Capital]
EY survey: 41% of firms shared client data with third-party providers [Business Daily]
Kenya’s ride-hailing firm Little Cab joins Safaricom in Ethiopia [Business Daily]
Zoom will start charging VAT on Kenyan individuals and companies from 1st August 2021 [The East African]
Orange officially submitted its bid for a stake in Ethio Telecom which the government of Ethiopia is seeking to privatize [Reuters]
Rwanda’s Issuer Default Rating (IDR) revised to negative [Fitch]
EY Tanzania: Banking sector assets grew by 4% in 2020 [Daily News]
Uganda begins a trial delivery of petroleum products from the Dar-es-Salaam port through Lake Victoria, after a 16-year break [The Citizen]
The Tanzania Railways Corporation to receive the first batch of the 42 electric trains by November this year [Business Daily]
