Tuesday, August 25, 2015

NSE Kenya - 50 bagger

Having seen a large number of research reports, focusing on next 20-25% only, but on equities that went up several fold, are in stark contrast to how a long term investor should think and a great dis-service to long term investors.

I read a statement recently, "Best investing articles are the ones that have nothing to do with investment". I see this all the time, with investing newsletters venturing into  philosophy.

The problem I find with this statement is that the person in context has defined himself / herself narrowly as an investor. I have not. As a man shall not live by bread alone but by every word of ....., no investor shall live with stocks or financial analysis alone. It is too drab to focus on single domain without variety. 

So, I do not like philosophizing on equities but come to the point. The point being making money with multi-fold growing ideas. Hence the title of this post.

While I may be wrong in duration it may take for NSE Kenya to be 50 times, perhaps it could be a mere 20 bagger over next 12 years. Every serious long term investor should go through annual reports of NSE Kenya and find out if he/she holds the company that is better than this? I unequivocally found the answer to be No, in every situation, not excluding BRK. That also depends if you consider 18-20% to be sufficient year in and year out. 


Someone needing USD there is some semblance of currency depreciation to keep them away from Kenya or Nigeria, but for INR earners, that does not seem to be the case.

In the previous three years, the company grew top line by 25-35%. 2015 was a hard year for Kenya with tourist cancellations, scaremongering by CNN on security, horticultural crop failure, so, in the six months ended 30th of June 2015, the company grew topline by just 15% and bottomline by 40% (that is a bad year). A great company constantly throws up two choices "Very good and excellent, and a bad company constantly offers you other two choices gruesome and horrible", speaketh Buffett. This result sets the company at valuation of ~10.5 times earnings (as opposed to 12 that I said in previous post today http://multibaggersindia.blogspot.com/2015/08/why-india-is-still-expensive-sensex.html). Again, for my the benefit of my institutional brethren, its TTM not FY18 earnings.

Link to half yearly results: 30-June-2015

NSE Kenya is a lot similar to CRISIL, but only better in every respect, in terms of cash flows and market share. Dividend payout needs improvement. A lot of investors from India are familiar with CRISIL one of the biggest credit rating agencies of India, and if you see its 10 year chart, it has gone up 200 times. Crisil is growing at humble 15% but PE ratio is 65.


CRISIL price went up 200 times for those who dared to invest with fog on the windscreen. Very High quality companies will not be available at 10 times earnings, nay even 30 times earnings. That has been the case in my experience with India, Pakistan and Bangladesh; I would wager that will be case with Kenya and Nigeria as well.

I will be least surprised if the dividend per share after 10-15 years on NSE Kenya is far bigger than 2015 current market price of the script. If you find one such company, and you do not pounce on it, you are making a big mistake.

Lastly, NSE Kenya has no reason to be listed, merely a Capital Market Authority mandate to share wealth. That is exactly what you need to be looking, companies that are listed due to a freak accident and are not in need of capital.

Its time for you to get rich, think 10 years forward!


  1. Hi Amit,

    I am glad to know about NSE Kenya, a few days back was reading about BSE India going public which lead me to think about this recession proof business. Whether markets go up or down, there is always a buyer for a seller. The more the volatility, the more people trade & more will these companies earn.
    In last blog safir also talked about volatility due to instant noise availability. I want this toll bridge company in my portfolio.
    I want to invest in Kenya. Can you tell me the procedure??

    My account is in HDFC.



  2. Nicely written Amit.
    Only possible risks to be evaluated to the business: In 2009 reduction in transactions led to operating losses, so how much amount of reduction would lead to such a scenario, and probability of the same. Given the greater base today probability is lower as compared to 2009.
    Reduction in transaction costs per trade. Not evaluated the extent and impact of the same.

  3. Thank you Guys,

    I have persona account with shares@dyerandblair.com, you can email them and give my reference.

    Bank account can be opened with CFC Stanbic Bank for getting your dividends, GumoP@stanbic.com

    You will automatically get an account with CDSC Kenya (equivalent of NSDL of India), so if Broker or Bank goes to Zero, you are protected.

    You can give my reference to Gumo Pauline at CFC Stanbic and address email to Lynet @ dyer and blair email ( I GET NO COMMISSION FOR REFERENCE)

    Alternatively you can open account with other brokers.


    NSE is about to acquire CSDL (another monopoly of Kenya), 30% of their income is from rent + interest which is stable.

    Yes whether bloothbath or a bull bash, Exchange always Wins !

    All the best

  4. NOT just NSE Nairobi Kenya, but overall the whole Kenyan market looks very exciting. It looks like Indian market of late 70s and early 80s with a market regulator and depositories in tow and also auditors like BDO, KPMG, E&Y really commonplace.

    there are great businesses and companies selling at cheap valuations...

    any other market you think would be equally exciting as the Kenyan market....would love to hear back.

    1. Kenya has a clear plan, after South Africa it will be the financial hub by 2030



      Read page 55/to 60 on cdsc

      CDSC is a natural monopoly as also mentioned in the paper, over 100% ROE if you exclude the cash on books, same as NSE



      Bangladesh, Pakistan are good too

  5. Hi Amit,
    Don't you think the size of INR 180 crores is relatively small, with respect to any adverse developments in the geography, impacting the business of the company. Basically my level of comfort of investing in micro-caps was much higher domestically, but wanted your thoughts on it.
    Secondly is'nt there a conflict of interest of shares of company being listed on the same exchange.

    1. Hi,

      180 crores is for country with 1/30th the size of India. Small is good that is why it can go up 100 times.

      NSE Kenya is more transparent than BSE India or NSE India, its drowning in cash, and listed for transparency, with very diverse shareholding.

      Exchange listed on itself is common pattern in developed cou tries for Euronext, NZX, ASX, JSE, SGX, JAPAN, DUBAI, LSE

      India is behind other markets including Kenya on this count.

      Country Risk and Currency Risk exists.

      Kenyans have also preference to invest in local small caps rather than Indian or Chinese stocks, thats human nature :)

  6. amit sir..i have been following ur blog from last five years. very interesting and inspiring writeups.. always look forward to your next write up.. thanks!!

  7. Dear Amit..
    Any update on Sarup.
    Recent nos are not encouraging and stock corrected,do u have any info.on completion of mall construction.

    Many thanks Amit.

  8. Dear amit sir,
    recently sarup ind announced their interest to starting a new manufacturing unit at Kundli, Sonipat, Haryana for carrying out the current line of business
    is it a psitive factorfor the co
    any updates on the mall poject

  9. http://www.capitalfm.co.ke/business/2015/09/uk-property-investment-firm-to-list-on-nairobi-bourse/

  10. Retail chain Tuskys Supermarkets is warming up to the possibility of an initial public offer (IPO) by 2019 following bullish growth that has seen it grab significant mark share in Kenya and East Africa


  11. Hi Amit,

    I have been following your blog for a year now.. Your blogs are very thoughtful and to the point. Great work!!


  12. Hi Amit

    Isn't it tracking the day to day events is tough when we invest in kenya or some other country from india for a small investor

  13. Hi Amit

    Isn't it not easier for a small investor to track markets of one country from another

    1. Hello Satya

      Where there is a Will, there is a Way.

      Any Kenyan invested in India does not have to monitor HDFC Bank in India except once per annum, same way for an India invested in NSE Kenya, once a year go through Annual Report.

      It may be hard to track other small and mid cap Ideas. Active monitoring may provide more returns.

      I am not sure what is a "small investor", person with less brain, less passion or less money in this day an age.


    2. Thank you Amit for reply.

      Haha ! All three characters above mentioned by you belongs to "small investor"

  14. Hi Amit,

    Your blog and article is very informative. My question is can Indian Retail Investor invest in shares of Kenya and Nigeria..If yes, how. Do we need to open a bank account in that country as well. What about taxation on dividend/capital gains. Is there any minimum/maximum amount of investment. Further can you also please tell the symbol of NSE Kenya. Thanks

  15. Hi Amit ,
    Thanks for your refreshing insights. Its a pleasure to follow your blog.
    Regarding NSE Kenya ,don't you think its better to compare it with JSE south Africa ? The only other listed stock exchange in Africa. As the only stock exchange in South africa,the monopoly characteristics apply here too and its available at 16 PE with a Mcap of 5400cr. JSE has a much longer history ,depth too with several multinationals listed in it.
    Do you see NSE Kenya growing at a much faster pace than JSE ? Would it get a much higher PE than JSE?

    Would love to hear your view.

  16. Hi Amit,
    Could you let us know on how is the scene in Kenya is now for investing in NSE Kenya?



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