Wednesday, December 31, 2014

Bangladesh in 2014

Broader market index returned 14%, Top Large Caps over 100%, ditto for consumer brands like Bata, Marico, Reckitt Benckiser, Glaxo, Mobil and few more.

Market Cap to GDP ratio is still favorable at 24%

Despite the stellar returns this year, one can expect decent returns in equities in Bangladesh ~ 20% in local currency, relatively speaking. Top consumer brands offer 30% - 50% ROE with great cash flow, statistically cheap multiples.

Low crude will keep the BDT/USD currency equation stable (biggest elephant in emerging market investing). Large immigrant population and remittance, an added bonus. 

Market is gradually becoming a diverse one with 547 listed companies -- 17 new IPO in 2014, likely to attract foreign investment.

Banking could rebound this year, biggest weight which did not perform in 2014, 

Sectoral Return

Biggest five large caps did not fail to compound

IPOs not for investors (only traders)

Dhaka stock exchange also introduced new trading software on exchange on 11th of December 2014 in collaboration with NASDAQ OMX, introduced T+2 ( instead of T+3) reducing the cycle. 

Corporate profitability to increase in 2015 on back of low inflation, increase Govt. employee salaries, low oil input price. The country is a fertile ground for multibagger opportunities.

Disclosure: Invested in stocks discussed. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Monday, December 29, 2014

Africa Investing insights & enlightenment

I intend to cover a few key points regarding overseas investing with focus on Africa.

First off, its harder to generate returns in Africa than I imagined a few months back. 

Returns are likely to be in a very narrow set of stocks.

Essentially, I can lie with statistics, ( to prove just about any point. That is why crowds of men (and women included) diverge vastly on opinion in the world on just about any domain, even ready to kill each other, not recognising, perhaps they can be ignorant, or worse blind. 

This difference of opinion persists due to ignorance. Concentrated portfolio makes money and Diversified portfolio makes money, equal, depends on the person and circumstances. Consensus equity ideas make money, abstruse and arcane make money, equal, depends on the person and circumstances.

I can prove that future of Nigeria is great, or bleak or mediocre with statistics and facts and pull the wool any which way.

In truth, we are operating in a range of probabilities in every discipline.

20 / 2

This is not the 2% of Assets and 20% of commission of Hedge Funds but the stark reality of Africa.

Earning 20% consistently in Africa is 2 hard, there simply aren't companies growing that fast as they are in India. 10-15% expectation is more likely to keep your sense of balance and sanity.

Few Stable Countries

Most of the continent is still under developed with key levers of infrastructure, stability, political will, strong institutions missing to make exponential gain.

Not to say that there will not be 100 baggers in Africa, but the soil needs more tilling. The proverbial mall is still under construction and you are unlikely to sell you wares in the shop.

Few countries offer the stability one seeks, with about 2% of portfolio investment in Nigeria made till date, waiting keenly for the next economic outcomes to increase holdings. 

Exchange Rate Risk

Most of the currencies depreciate against USD as they run deficits, one can hedge but there is a cost involved. That may further mar the returns in USD terms.

South Africa

Perhaps what I overlooked at first was the opportunity to invest from South Africa, disregarding it as an already mature market. 

One of the issues with South Africa is the Market Cap / GDP ratio of 160% ( around 12% for Nigeria, 90% for India, 115% for United States and 15% for Bangladesh), that would be repelling for a value hunter.

One can however, sift through companies that are keen and aggressive on expansion outside their frontiers.With local knowledge hey are best placed to win, rather than companies from United States, India or Europe.

One can relish the 70-80% cash cow margins of South Africa's stability and bet on aggression and exponential growth (whenever that happens) in other African countries.

Manufacturing or Trading or Service

I always had the bias for niche manufacturing, remember that Walter Schloss ( also expressed on one of his interviews his inclination to buy companies that make widgets or things than Service oriented companies.

Surprising, thanks to wisdom of John Sutton's Enterprise Maps (,companies with local knowledge in countries like Ghana or Ethiopia with trading background score over and are superlative to, manufacturing companies. An exception where local knowledge trounces niche manufacturing. These small trading companies eventually build out and conquer with manufacturing base.

Suitable Time cut-offs for fudging with statistics

There are only 15 companies listed on Dar Es Salaam stock exchange in Tanzania. And 5 out of those 15 have returned between 58% and 124% in the past 11 months. 

That does not tell you, after how many years of plateau. A couple of large institutions can move the market of total (30 Billion USD market cap) of Tanzania. 

Don't expect an encore next year from Tanzania. There are 54 countries in Africa. Next year one may see a different country where puck will be. This effort is an exercise in futility, akin to betting on the list of gainers in next one week ( on Bombay Stock Exchange where over 5000 companies are listed).

Mark Mobius Fund

"Nothing is cheap and this world is a vastly different place as it used to be in 70s or 80s. You may find value investor in unheard of countries" - Charlie Munger

Was reading on Mobius who is an emerging market super bull, he does not find anything cheap in Nigeria other than Banks (something I don't like to touch unless as a basket bet which as exactly what Templeton Frontiers Market Fund has done).

This 1.2 Billion USD fund has compounded at 11% CAGR for the past six years

New Markets

Waiting for more markets to come online. Angola grew GDP at 11% between 2001-2011 and may have equities listed by 2016.

Myanmar stock exchange has two listed companies and eight employees, a failure in short. Has plans to restart in 2015

Consciousness (Guy Spier)

Was reading an investment book recently by Guy Spier, Education of a Value Investor and around page 35 of 202 author approaches topic of Consciousness, how it builds the world and how we need to imagine the future even before it happens, so as to help create the future we want.

Any physicist will tell you we are just a vibration, the laws that we have not yet discovered are considered to be miracles. 

Mind and Spirit are the stuff where western Science (19th, 20th and 21st century western) falls silent, and has nothing to say. I find it somewhat strange that I grew up in India in 70s, 80s and 90s on stable western educational diet of cramming in intellect, no food for soul, despite the fact that literature of the country is richly preserved on matters related to spirit. 

Only intelligence is a valued currency, not emotion, not morality, spirituality is not even understood clearly because it is above mind, super mind, supra mental. Generally one does not even aspire for spiritual insights until material ambitions are nearly or somewhat exhausted and one challenges the existence intensely. This madness needs to reach a crescendo as gasp for breath for a drowing man, I don't believe yearning is so strong for the most of us, but I will try to sow a few seed thoughts.

Angola with GOL in its name reminds me of Sanskrit (several thousand years old language) word for EARTH is Bhugol.

Bhugol = BHU (EARTH) + GOL(ROUND). Nasa figures it was discovered around 500 BC by Greeks

Some other sources cite as recently is few hundred years back. This is not about which civilization and country gets the credit, but about the truth. All evidence points that numerous past civilizations in Atlantis, Greece, India had interstellar travel and vast knowledge. Sri Yukteswar explains the basis of how the knowledge gets lost, descending cycles through which mans ability and consciousness descends, intelligence loses its keen-ness and dark ages come about.

Similarly, it is generally believed that Universe is Expanding was discovered by Edwin Hubble ~1929, only thing incorrect with this statement it is that it was re-discovered.

Numerous past civilizations have already figured this. Again a 5000 year old example from India, in Sanskrit the word for Universe is Brahmanda, BRAHAMANDA =BRHA (Expanding) + ANDA (EGG)

Unfortunately, even in India, aspiring for expanded consciousness is considered a wild goose chase, a retirement plan or something to be accomplished after death :-) and not something to be done with day job ! Knowledge of Spirit wasn't the only thing that was discovered by the ancients. Western science at large believes that man was a mud eating nincompoop monkey just 10,000 years back.

Our plan for ourselves is too small, the maximum an ordinary individual can conceive of is only some material riches, health and long life, eg: becoming a King of United States (that may require change in constitution), a harem of Miss Universes. The problem with this plan is that ordinary person cannot imagine being a superman, an insect that thinks and imagines like an insect is still an insect still, be it in a mud puddle or in a palace.

 A quote would not be out of place here: "My Guru found no insuperable obstacle to the mergence of human and divine. No such barrier exists, I came to understand, save in man’s spiritual unadventurousness."

Disclosure: Vested interest in Africa. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Saturday, December 20, 2014

Africa in Infographics - Part Two


The Top Economies in Africa

Giant Of Africa - Nigeria vs South Africa

Sources : Various, including and afrographics

Disclosure: Long Africa.Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Thursday, December 18, 2014

Africa in Pics and Prose

Prose courtesy John Sutton

Pics courtesy of Afrographique, Global Post

Disclosure: Long Africa.Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Saturday, December 6, 2014

Nigeria Trivia

Nigeria, one-third larger than Texas and the most populous country in Africa

Its GDP has recently overtaken that of South Africa.

The country is gradually transitioning from military to civilian rule, although with violence in northern part of the country. 75% in north and 50% in rest of the country is unbanked.

Current population is 170 million (7th most populous country in World). Per capita income is 3000 USD ( India is at 1500 USD)

Fertility rate is 6 births per woman.

It is on track to be 3rd most populous country of the world by 2050 after China and India overtaking USA., are equivalents of, growing rapidly.

Nigeria gained independence in 1960 and joined the Commonwealth. Most of the history has been marked by Army rule. In 80s Nigeria was considered outstanding democracy. In 90s UN categorised human rights and political problems as terrifying.

Boko Haram (literally translates to "Western education is sinful.") were peaceful for initial seven years from 2002 - 2009, in July of 2009 when the uprising turned violent and deadly. Problems with morale and organisation of Army are grave to dominate over Boko Haram even as at 2014, government is seeking western help to upskill army.

1/3rd of Nigerias 36 states are governed by Sharia Law.

95% of Nigerias export and 75% of Government revenues depend on oil. (Oil price in 2014 down by 35%). This will have negligible impact on social life of most citizens, as most of the money is stolen.

Nigeria, like most of Indian states suffers from "resource curse" despite being oil rich, with only a small minority being rich while 75% of the country lives in extreme poverty.

For over two decades Nigeria has been repressed and mostly unfree as the states intrudes heavily into private sector development.

Top Individual tax rate is 24% while corporate tax rate is 30% ( much better than Bangladesh's 42%)

Nigeria is amongst the countries which have "decades of catching up to look forward to" and part of Next 11 ( and 3G (Global Growth Generators) countries ( ).

Market Cap to GDP ratio (vital for long term investing) is more than attractive at 12% (115% US, 85% India)

Agriculture contributes 40%, while services 30% to the economy.

Nigeria has grown as fastest pace in the world post 2008 ( only after China, but before India) but terrorist attacks ( another persons freedom fighter) have shaken the country. Security is a risk. GDP has grown every year over 6% since 2003 !

Nigeria needs a few breaks such as this 30 Billion USD investment (Nigeria needs a few breaks) and its own equivalent of India's Narendra Modi!

I am usually astounded to read some mid cap annual reports with statements like  "We cannot rely on national grid, we need to generate our own electricity". Capital is really scarce and it could earn 20% returns on equity for prolonged periods.

Opportunities for value investors are hard to ignore even though equity markets may have to cross mountain of misery and hills of headache ( not just Peter Lynch's Wall of Worry).

Disclosure: Vested interest in Nigeria. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Wednesday, December 3, 2014

Saving 400$ on your New Zealand visit

New Zealand has tough, bordering on atrocious biosecurity laws, rightly so, 70% of flora and fauna is uniquely native to New Zealand and not to be found in any other country of the world. There is a real need to protect from pests ( if protecting native species is of importance). I won’t bring in my crazy ideas of infinitely mutable life forms transiently present few millennia, only to evolve out to other species. Let us assume plain vanilla Newtonian Darwinian view of Universe, all life is physical and only moderately change and its imperative to protect them. ( Globally a losing battle ). I respect this regardless of the fact that this 15 billion earth years old physical universe may have been created and dissolved countless times ( possible ! ).

Back to non-infinity and mundane.

Now, if you bring to NZ any food and do not declare on the Passenger Arrival Card, you get an instant slap on your face ( err. debit in your bank statement, 400$ to 100,000$.)

You would believe that after being a New Zealand citizen and living here for over seven years, I would be aware of it, right I was and am!

Still I was fined few months back, in instant infringement notice at the airport for bringing in Salad which I bought at Sydney airport, which I also declared on the Passenger arrival card ! I refused to pay the fine and was furious at the airport at biosecurity officers, lost my cool and vowed to reach Prime Minister until this matter is resolved and I am allowed scot free.

A game of tricks

Well, I did not know that I will be questioned in person on the airport, trick questions, hard to dodge mental mind bends by those who play the game at the airport 24*7. I play this game of customs couple of times a year. So effectively I can’t beat the best poker player in town as I practise it only 10 minutes, twice a year.

I vowed to fight tooth and nail, even if involves a protracted legal battle. Most of the people give up after initial anger, one person is small, Govt. is large and formidable, anger and hurt soothe after few day and normal Jo ends up paying 400$ fine. This is what most of my colleagues ended up. One of them calls is “Tirupati Donation” a fee to be paid at Temple for homage.

I chose a different path this time because I believed this is a very subjective terrain and felt a moral obligation to fight.

What did I do wrong?

I was asked question at the airport regarding who packed the bags ?

I answered, myself, most people do that. ( It is a wrong answer). It trapped me. Correct answer always is myself and family and I don’t know all the contents of the bag, always !

Next, I was asked to name food items I was bringing.

I named 12 out of 13 but not the 13th one.  ( If I were bringing 129 food items would I be able to recall all 129 from memory ? )

NZ Biosecurity Officer warned, “You bought the salad 3 hours back at Sydney airport, you should have been able to recall from memory”, disregarding that I had a 42 hours flight from New York.

I lost it, and was yelling at all the cops at airport and was escorted by a an armed gunman to calm down. Fine would be the last thing I would have paid. When I had already declared Salad, in writing, on the only legal document that I was supposed to fill in, i.e. Passenger Arrival Card, why is my memory test being taken?

The preparation

I had traumatic sleepless night on the day. I did not accept the defeat.  I noticed that the system was designed to protect NZ flora and fauna has degenerated to revenue minting process.

I prepared a solid two page letter with help from few friends and wife, challenging the infringement notice, requesting a court hearing and started preparing for court battle.

Finally I was waived from fine. I do not have the energy to fight the system to request for a review of the whole immigration interrogation process. Hence this blog post to warn any potential visitor to a) No bring any food, plant, wood, feather, or any animal product to New Zealand or b) Declare it on passenger arrival card & if asked any question at airport about what you are bringing, not naming food items from memory, but either pretending memory loss or open all suitcases and name one by one EVERY food item by physically sighting it. Option a) seems easier if you want to save on 400$ on your next visit to New Zealand.

I have a lot to add but will stop here.

Wednesday, November 5, 2014

Unilever Nigeria Halves in couple of months

From 63 Naira to 31 Naira in few months. 10% drop in sales and increase in interest payments. That's it for now! More research and details to follow soon. "There is always a bear market somewhere !"

Disclosure: Will start buying from Friday the 7th of November. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Monday, October 20, 2014

Top Brands in Nigeria

Annual ranking of brands on the lines of Deliotte Fast 50, or Superbrands India is undertaken by

Feeling like I've never been this lucky before since 2009, to have found three back to back bear markets. Generally staying in a single market takes 7-8 years of patience to find the next bull market eg: 1992, 2000, 2007, 2014 in India. But global investing opens the vistas for more frequent bear markets. Second opportunity afforded is going back to 1970s in 2014. 

Disclosure: Vested interest in positions discussed. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Thursday, October 16, 2014

GlaxoSmithKline Nigeria - initial thoughts

GSK Nigeria

Abstracts and thoughts based on previous four annual reports and some news articles:

Revenue Growth between 2006 – 2010 at 12-14% rate

2010 Turnover up 13% PAT up 45%, PE Ratio 10 -12

2011 Turnover up 28% PAT up 16% PE Ratio 10

15 new products were launched  in 2011 !  This is a great innovation metric used by 3M and Google. It quantifies an otherwise black art of innovation estimation.
3M mandates that 35% of the revenues should come from products launched in the past four years. The company stands out distinctly with its assorted collection of knick knacks.

GSK stood out in the past decade on this score. Some organisations call it “vitality index” or “innovation index”, measured as new product revenues divided
by total revenues. New product in Silicon Valley may be 9 months, 3 years in most industries or 10 years in Airline industry. There are books on the subject, we will leave
management consulting to the experts and leave ourselves with business analysis and its side effects of getting rich.

The company was confident of double digit growths around this time. Company had planned more launches in 2012 based on science and deep consumer insight.

Company also enjoyed an astounding 5 billion Naira CFO in 2011 vs 3.2 Billion Naira in 2010

Page #51 of  AR 2011 is a delightful sight, dividends have increased with clockwork precision at 30% CAGR from 12 kobo in year 2000, to 120 kobo in year 2010. (1 Nigerian Naira = 100 kobo just as 1 $ = 100 cents)

In 2012 The turnover was up 18%, PAT of 23%

Government reduced subsidy on fuel, resulting in 12% inflation.

Real growth rates in Nigeria, however, continued to be as good as 9% between 2009-2012

In 2012 GSK introduced Lucozade Boost Can.

Company writes “Introduction of new products has contributed considerably”, innovation index brownie points!

In 2012 B/S of 21 Billion Nigerian Naira  with 10 Billion Retained Earnings, 8.2 Billion Trade Payables, no long term debt, some taxes payable looks like is an adorable garden nestled in a fortress.

Depreciation growth is moderate (cool), 810 Million this year (vs 738 million previous year)

2013 Turnover is up 13% PAT up 3% PE Ratio of 20

GSK Nigeria now 4th best place to work out of 38. Introduced a whole raft of goodies. Ribena Can, Ribena Pineapple, Ribena Cherry. Lucozade extends flavours to cola, cherry, tropical, raspberry, orange. Sensodyne Rapid Action is introduced, McCleans Sachet ! wow taking a cue from Hindustan Unilever in India for shampoos, should do well.

CFO 4.9 Billion up from 3.7 billion. Out of 29 Billion Naira revenues 20 derived from Consumer, other 9 billion from Pharma.

Between 2000 – 2013, i.e. 14 year period revenues rise from 2.9 Billion to 29 Billion. PBT from 97 million to 4.3 billion. Fixed asset formation from 400 million to 12 billion .
26 billion B/S still looks like an invincible iron man. Current PE of 18 is still marked down. Unbelievably at 20% growth it was available at 10 PE.

Personal Opinion: GSK is not very competitive against Pharma companies of developing world, nor is Reckitt Benckiser in consumer space. Products are not made with price attractive for developing world. Most products introduced in the recent five years are in consumer space.

A tragedy for GSK Nigeria is that whilst Lucozade and Ribena was not important for GSK Parent, they are significant for Nigerian entity, where the company derived 54% of consumer revenues in 2013 in Nigeria. These brands are famous in over 100 countries and are found in tiniest of countries (Nigeria is a warm country). In 2013 Japan's Suntory bought the rights for these two brands globally from GSK for 2.1 Billion USD. While Suntory has not started manufacturing these two products yet in Nigeria, the entity in Nigeria will have to commence royalties, hence profit numbers will suffer permanently. On top GSK has vowed to not build more than seven top brands in consumer space like Horlicks, McCleans, Sensodyne, Panadol (something I dislike). Need management interaction and more research before pulling trigger.

Nice to be in a position to say pass to a company considered par excellence with an infallible balance sheet. We do not own this yet but very well can any day, hence you should assume we have a bias to buy.

Disclosure: Vested interest in positions discussed. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.