TRANSCENTURY LIMITED REVIEW

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TransCentury Limited’s (TCL) shares touched a new low of Kshs. 23.00 in trading at the Nairobi Securities Exchange (NSE) on Tuesday January 17^th 2012 after trading 1,800 shares.

The share eventually closed at Kshs. 23.50. This represents a 53% drop from the introductory price of Kshs. 50.00 on July 14^th 2011. Soon after the listing, the share touched a high of Kshs. 60.00, but has been on a swift downward spiral since then.

No doubt the company’s decision to go on with the listing at a Price to Earnings ratio of 38 due to what they termed “good prospects” while other NSE-listed investment companies were going at much lower multiples, and granted, also had good if not greater prospects, aided in the drop.

In light of this development, I undertook a review of the company and its operations

Through its various divisions, the company holds stakes in different companies:

Consumer Division

Chai Bora: This subsidiary of TCL is a market leader in blending, packaging and marketing tea in Tanzania, controlling 60% of the market

Power Infrastructure Division

This division is the mainstay of the company and indeed contributed 81% of turnover in 2010.

East African Cables (Owns 63% stake): Acquired in 2004 from Sameer Group. In its Half Year 2011 results, the cable maker rebounded from a 57 Million loss to post a 172.3 Million in Profit After Tax (PAT)

Kewberg Cables (100%): Acquired in 2007

Tanelec Limited (70%): Tanzanian transformer manufacturer. Acquired stake in 2007

Cableres du Congo (100%): Acquired in 2010

Special Engineering Division

Avery East Africa: Incorporated in 1970, it focused on the supply, manufacture, maintenance and repair of weighting scales. It has though diversified into dealing with inkjet coding equipment and has now ventured into the energy sector where the company is actively supplying power generation equipment

In December 2011 during an Extraordinary General Meeting, TCL shareholders approved an investment by the company in Civicon Group Limited and its affiliates. Civicon deals in projects involving heavy transport, cranage, piping, tanks, steel erections and road building across Africa and the Middle East

This, the Chief Executive Officer, Gachao Kiuna, expects to even out revenue across the divisions.

Transport Infrastructure Division

Through this division TCL owns 34% of Rift Valley Railways Investments (RVRI) which has a 25 year concession to operate exclusively railway services in Kenya and Uganda

In July 2011, Citadel Capital, which is the majority shareholder in RVR, reported that RVRI achieved a positive EBITDA for the first time since it invested in it. Citadel said that for the month of June 2011, RVRI had an EBITDA of Kshs. 57.28 Million

After receiving a financing package from a consortium of lenders, RVRI embarked on a $287 Million capital expenditure to increase volumes and revenues significantly over the next 5 years.

TransCentury also has holdings in several financial services firms, chief of which is a 10.7% stake in Development Bank of Kenya. Other investments include an array of international Private Equity firms

TCL plans to join the Real Estate bandwagon. It owns 100% of a prime 6 acre plot in Karen and intends to develop it into a 24,000 square metres lifestyle mall with commercial office space

The company posted a Kshs. 54 Million Profit After Tax for its half year ended 30^th June 2011. The group’s peak year in terms of profitability for the last 5 years was a net profit of Kshs. 1.17 Billion in 2007. 

In 2010, the company had a PAT of Kshs. 468 Million. The company will however have to produce a stellar 2^nd half performance to match those results.

Management though had indicated its intentions to ramp up production further in the 2^nd half as key capacity expansion projects in Kenya, Tanzania and South Africa came to fruition

Total Assets for TransCentury as at half year 2011 stood at Kshs. 15.3 Billion

TCL had listed 267,038,090 shares but under its Convertible Bond Programme (CBP), it listed an additional 6,912,194 shares taking the total number of listed shares to 273,950,284.

144,008,422 ordinary shares still remain reserved for the CBP

Whether the share will hold at current prices or go much lower will depend on the set of its 2011 second half performance.

TransCentury C.E.O Gachao Kiuna was featured alongside his Centum counterpart James Mworia on Forbes’ 10 youngest power men in Africa

DIAMOND TRUST BANK 9 MONTH PROFIT BEFORE TAX UP 13% TO 3.1 BILLION

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Today morning Diamond Trust Bank Kenya Group (DTBK) announced its financial results for the 9 month period ended September 30^th 2011

Profit Before Tax rose by 13.1% to hit Kshs. 2.1 Billion. Profit After Tax was up 10.4% to Kshs. 1.95 Billion

Subsidiaries in Uganda, Tanzania and Burundi contributed Kshs. 264 Million to the Profit After Tax, 13.6% of the total profit. At half year, the contribution was 12%

Cost:Income ratio was down to 53.6% from 52.82%

2010 vs. 2011 Analysis

	2010  Kshs.	2011  Kshs.	% CHANGE
TOTAL ASSETS	80.2 BILLION	107.2 BILLION	+33.6%
NET LOANS AND ADVANCES	50.1 BILLION	74.6 BILLION	+49.1%
CUSTOMER DEPOSITS	62.5 BILLION	85.9 BILLION	+37.3%
LOAN:DEPOSIT RATIO	80.07%	86.95%	+6.9%
TOTAL INTEREST INCOME	5.44 BILLION	6.7 BILLION	+23.1%
TOTAL INTEREST EXPENSE	2 BILLION	2.02 BILLION	+1.4%
NET INTEREST INCOME	3.45 BILLION	4.68 BILLION	+35.6%
TOTAL OPERATING INCOME	5.83 BILLION	6.7 BILLION	+14.9%
TOTAL OPERATING EXPENSE	3.1 BILLION	3.6 BILLION	+16.5%
COST:INCOME RATIO	52.82%	53.57%	+0.7%
PROFIT BEFORE TAX	2.75 BILLION	3.11 BILLION	+13.1%
PROFIT AFTER TAX	1.77 BILLION	1.95 BILLION	+10.4%

Total Assets increased by Kshs. 37 Billion to Kshs. 107.2 Billion

Customer Deposits was up 37.3% to Kshs. 85.9 Billion

The increased deposit base allowed DTBK to advance more loans to customers. Indeed, Net

Loans and Advances surged 49.1% to Kshs. 74.65 Billion

Total Interest Income was up 23.1% to Kshs. 6.7 Billion, helped by a 28.3% rise in interest from Loans and Advances to Kshs. 5.95 Billion. Interest from Government Securities slipped 20.4% to Kshs. 561 Million

Loan Loss Provision decreased by 25% to Kshs. 366 Million

Non Interest Income went down 15% to Kshs. 2 Billion as ‘Other Income’ fell by 81% to Kshs. 200 Million.

Fees and Commissions were up 41.8% to Kshs. 1.11 Billion

Foreign Exchange Trading Income registered a 30.8% growth amid the recent volatility of the Kenya Shilling to Kshs. 707 Million

Staff Costs increased by Kshs. 243 Million to Kshs. 1.43 Billion

Gross Non Performing Loans increased to Kshs. 915 Million from Kshs. 820 Million as a result of the increase in Net Loans.

The quality of the loan book (GNPL/Net Loans) still improved to 1.23% from 1.64%.

Net Non Performing Loans was up by 19.3% to Kshs. 108 Million

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011          Kshs.	Q3 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	2.2 BILLION	2.6 BILLION	+16.5%
TOTAL INTEREST EXPENSE	619.3 MILLION	838.6 MILLION	+35.4%
NET INTEREST INCOME	1.58 BILLION	1.73 BILLION	+9.1%
TOTAL OPERATING INCOME	2.2 BILLION	2.47 BILLION	+12.4%
TOTAL OPERATING EXPENSE	1.02 BILLION	1.41 BILLION	+38.7%
COST:INCOME RATIO	46.4%	57.3%	+10.9%
PROFIT BEFORE TAX	1.18 BILLION	1.05 BILLION	-10.4%
PROFIT AFTER TAX	818 MILLION	612 MILLION	-25.2%

A glance at the Quarter on Quarter analysis reveals Q3 was definitely tougher than Q2 for DTBK

Operating Expenses rose by 38.7% in the Quarter

Cost:Income ratio for the 3^rd Quarter alone stood at 57.31%, 10.9% higher than Q2 2011 which had a Cost:Income ratio of 46.44%

It thus follows that Profits for the 3^rd Quarter were lower than Q2 Profits

Following the results, DTBK is trading at Price Earnings ratio of 7.37

BARCLAYS BANK OF KENYA 9 MONTH AFTER TAX PROFIT UP 11.2% TO 6.1 BILLION

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Barclays Bank of Kenya (BBK) announced its financial results for the 9 months ended September 30^th 2011

Profit Before Tax rose by 26.4% to stand at Kshs. 8.9 Billion. Profit After Tax, though, was up 11.2%, at Kshs. 6.1 Billion

The profit growth was guided by a significant reduction in staff costs and a reduction in the loan loss provision

Gross Non-Performing Loans (GNPL) were down 9.8 percent resulting in GNPL/Net Loans improving by 1.1% to 5.76%

The significant reduction in expenses led in the Cost:Income ratio reducing to 54.65%, from 64.46%

During the period, BBK managed to recover previously impaired loans   

2010 vs. 2011 Analysis

	2010  Kshs.	2011  Kshs.	% CHANGE
TOTAL ASSETS	177.1 BILLION	180.9 BILLION	+2.1%
NET LOANS AND ADVANCES	91.7   BILLION	98.9 BILLION	+7.9%
CUSTOMER DEPOSITS	127.7 BILLION	135.8 BILLION	+6.3%
LOAN:DEPOSIT RATIO	71.78%	72.82%	+1.0%
TOTAL INTEREST INCOME	13.3 BILLION	12.7 BILLION	-4.3%
TOTAL INTEREST EXPENSE	1.22 BILLION	732 MILLION	-40%
NET INTEREST INCOME	12.1 BILLION	12 BILLION	-0.7%
TOTAL OPERATING INCOME	19.7 BILLION	19.6 BILLION	-0.9%
TOTAL OPERATING EXPENSE	12.7 BILLION	10.7 BILLION	-16%
COST:INCOME RATIO	64.46%	54.65%	-9.8%
PROFIT BEFORE TAX	7 BILLION	8.9 BILLION	+26.4%
PROFIT AFTER TAX	5.5 BILLION	6.1 BILLION	+11.2%

Total Assets grew by 2.1% to Kshs. 180.9 Billion, which is less than the 5.3% which the entire industry grew by in the 9 months to September

Net Loans were up 7.9% to Kshs. 98.9 Billion

The Bank managed to ramp up its profits in the period in no small part to the reduction in their expenses, as Total Interest Income and Total Operating Income were both down

Interest from Loans and Advances as well as Interest from Government Securities was down.

Meanwhile Interest Expenses on Customers Deposits was more than halved to Kshs. 433 Million, from 914 Million

Loan loss provision reduced by 55.7% to Kshs. 520 Million from Kshs. 1.2 Billion

Fees and Commissions declined by 7.2% to Kshs. 5.2 Billion

Foreign Exchange Trading Income was up 16.1% to Kshs. 2.1 Billion

Barclays’ decision to lay off managers at the beginning of the year led to Staff Costs decreasing by 15.1% or almost Kshs. 1 Billion

Liquidity was at a solid 47.6%, a 27.6% excess on the Minimum Statutory Ratio

Q2 2011 vs. Q3 2011 (Quarter on Quarter Analysis)

	Q2 2011          Kshs.	Q3 2011          Kshs.	% CHANGE
TOTAL INTEREST INCOME	4.0 BILLION	4.9 BILLION	+24%
TOTAL INTEREST EXPENSE	232.5 MILLION	319 MILLION	+37%
NET INTEREST INCOME	3.71 BILLION	4.57 BILLION	+23.2%
TOTAL OPERATING INCOME	6.3 BILLION	7.1 BILLION	+12.4%
TOTAL OPERATING EXPENSE	3.34 BILLION	3.55 BILLION	+6.0%
COST:INCOME RATIO	53.2%	50.2%	-3.0%
PROFIT BEFORE TAX	2.94 BILLION	3.52 BILLION	+19.7%
PROFIT AFTER TAX	2.11 BILLION	2.47 BILLION	+16.9%

BBK saw a positive Q3 2011 in comparison to Q2 2011

It is however interesting to note the 37% rise in Total Interest Expense for the corresponding quarters which is will likely be replicated in the next couple  of quarters

The release of the results came hot on the heels of the decision by the Central Bank of Kenya Monetary Policy Committee to raise the Central Bank Rate by 550 basis points to 16.5% in its attempt to try to rein in inflation

This will make the rest of the year a tough period for Kenyan banks to find new lending opportunities. Economic growth is expected to cool


Barclays closed Wednesday trading down 4.62% to 14.45/=. The share though rallied 38.5% in the month of October, only being bested by Williamson Tea which rose 62% in the same month. Barclays is trading at a Price to Earnings ratio of 7.5.