70.71 Group

South African technology firm Altech has increased its stake in internet infrastructure firm, Kenya Data Networks (KDN), causing major realignments in the company that have culminated in the replacement of its chief executive Kai Wulff.

Allied Technologies Limited’s (Altech) latest financial report indicates that its stake in KDN has risen to 60.8 per cent after it bought nine per cent shares in addition to the 51 per cent stake it has held since 2008.

Top managers at KDN and Swift Global — two companies widely seen as pivotal players in Kenya’s ICT space — have consequently been put on a fast-paced restructuring programme and replacement of their CEOs.

Mr Wulff, KDN’s straight-speaking CEO will now head the company’s newly formed Altech Stream East Africa division – the largest data network infrastructure provider in East Africa.

The new position gives Mr Wulff a much wider portfolio that includes overseeing KDN, Swift Global, Infocom Uganda, and Altech Stream Rwanda.

A South African with a background in television has replaced Mr Wulff in the corner office at KDN — signalling a possible change in the company’s focus.

Altech says in its financial statements that it has undertaken a “year of consolidation and rationalisation for Swift Global (Kenya), across its products and services and integrated its technical platforms into KDN’s infrastructure.

That move has effectively ended the short-lived tenure of Mr Aggrey Mahadhana as the chief executive of Swift Global – an Internet service provider.

In the past one year, KDN also lost some of its senior executives, among them Mr David Owino, the chief commercial officer.

Reports also indicated that a third high level executive resigned this week, citing incongruence with the firm’s new vision.

“The company appears to be changing its strategic focus and that makes it very difficult for executors of the current roadmap to fit in,” said a source, who declined to be named because he is not authorised to speak for the firm.

The change of guard at KDN is the latest in the continuing transformation of corporate Kenya with high level replacements in boardrooms and executive suites.

A number of chief executives in finance, consumer goods and manufacturing firms have resigned or taken up new assignments.

Mr Kuria Muchiru, a senior partner at PricewaterhouseCoopers (PwC), reckons that there is a strong correlation between high executive turnover and pressure for better results in the corporate world.

The latest shifts at KDN and Swift Global are largely attributed to a string of acquisitions and share swaps that have changed the balance of power in the companies’ boardrooms.

Increased buy-ins by South Africans into the companies that were founded in the 90s by Kenyan tech-preneur Richard Bell is the main driver of the changes.

The company’s latest financial statements indicate that significant restructuring took place in the portfolio managed by Altech Stream East Africa through additional injection of capital into KDN.

Sameer ICT owned 96 per cent of KDN while Mr Wulff held a four per cent stake, until 2008, when Altech bought a 51 per cent share in the company.

Altech now owns 60.8 per cent of KDN. Altech’s 2008 involvement gave the company the much needed Sh1.3 billion capital injection with a promise of a new corporate structure and discipline.

The South African firm increased its stake to 60 per cent last year after KDN acquired Altech Rwanda.

“In addition, Altech has acquired a further 1.8 per cent (voting) shareholding in KDN from a KDN minority shareholder, for approximately Sh255 million,” says the financial statements.

The company says 50 per cent of the shares will be paid for in cash over two years on the achievement of profit targets.

The remaining 50 per cent will be paid in Altech shares, which are subject to a phased-out release process over three years.

Altech has committed a further $39.5 million to the company since the buyout that is mainly targeted at network expansion to reposition KDN as a key provider of broadband in East Africa.

KDN is one of the top contenders for data infrastructure market in Kenya, with a nationwide fibre optic network.

The company has recently extended its footprints to landlocked Uganda and Rwanda, offering them the critical link to the world of high speed internet through the undersea fibre optic cables.

To tighten its grip on the market, KDN has crafted an extensive roll-out plan in the next couple of years that it hopes will enable it to capitalise on the explosive growth opportunity that growing data carrier demand offers in the region.

KDN raked in Sh4 billion for Altech in the year under review, up from the Sh3.4 billion recorded in 2008, mostly attributed to the strong growth in the Kenyan ICT sector and further developments in the Kenyan fibre industry.

This growth is expected to continue, supported by KDN’s strong position as the infrastructure provider of choice in Kenya and its expanding network in neighbouring Uganda and Rwanda.

Altech Stream East Africa has proven to be a sound investment for Altech, contributing 20 per cent of the group’s total operating profit.

The South Africans plan to diversify their profit contribution so that they have limited reliance on any one entity.

“We foresee that East Africa will be responsible for an even larger portion of profits in the near future. East Africa will remain our main focus, we are currently bedding down the investment before we potentially roll-out the Altech business model elsewhere in Africa,” said Altech CEO, Craig Venter.

Source:
BD Africa

The Nairobi Stock Exchange has emerged the best performing market among key African markets since the start of the year, feeding on foreign investor cash hunting for capital gains.

Research by the Business Daily indicates that the Nairobi Stock exchange NSE 20 Share index returned 26.8 per cent in the year to April 16 compared to Ghana’s GSE All Share Index (12.50 per cent), Egypt’s EGX 30 (12.2 per cent) and South Africa’s JSE index (six per cent).

Local analysts have attributed the show by the Nairobi bourse to “low priced shares” after the NSE faced deeper share price erosions in the last two years compared to other African markets.

As a result, international investors, mainly Africa-dedicated funds keen to cash in on the promise of higher returns than those found in other African markets, have increased their presence on the Nairobi bourse.

The NSE 20 share index has risen from 3,247 points to 4, 109 points since the start of the year.

“The East African equity markets had more or less lagged other African markets,” said Mr Eric Musau, an analyst at Renaissance Capital, adding that the new investor demand has helped the NSE catch up with the other main African markets.

The Johannesburg and Cairo stock exchanges are bigger than the NSE.

Financial analysts say that the NSE market counters have some of the lowest valuations, which is egging foreign investors.According to the NSE, the share of net inflows from foreign investors into the equity market had dropped to about 44.04 per cent as at March 26 compared to a high of 72.10 per cent on January 10.

The share of net inflows from local investors had on the other hand doubled to 55.96 per cent as at March 26 compared to 27.90 per cent on January 10.

But analysts say this should not be confused with foreign investors losing out because there is still some relative balance in trading.

“For instance we could still find that for every sale by foreigners there is a corresponding purchase among local investors,” said Judd Murigi, head of Research at CFC Stanbic Financial Services.

“The Nairobi Stock Exchange is the best performing in terms of return and investors are keen to get a piece of the action before the overall prices rise and reduce the margins.”

Blue chip stocks with high average daily turnovers such as Safaricom, East Africa Breweries, KCB Bank, Equity Bank, Mumias Sugar and Kenya Airways have remained the foreign investors’ favourite picks as they offer perfect platforms for ease of exits

Local institutional investors such as pension funds and insurance schemes have also picked the cue and are gradually returning to the stock market after opting to put their money in fixed income securities and real estates.

Their increased presence at the bourse has been prompted by the steady share price appreciation and falling returns on the government paper as well as improved profitability by listed firms.

The long dated bonds, for instance, has dropped by three percentage points over the past six months on increased liquidity in the market, forcing the Central Bank of Kenya to forecast further interest rate reduction on government paper.

“With interest rates on bonds coming down equities are becoming more attractive and institutions are changing their strategies,” says Mr Musau.

Retail investors, who fled the market after burning their fingers in the first major bear run since an unprecedented stock market rush-in that started with the KenGen IPO in 2006-are also returning to the market spurred by the share price appreciation.

The collapse of three stockbrokers in quick succession, which were heavy with retail clients, is widely believed to have been the single biggest factor that scared away the majority of the retail investors from the NSE.

Recovery phase

The growing interest has pushed the equity market into a recovery phase.

According to Mr Murigi, the NSE share index is likely to push through the 5000 index mark in the next two months, a clear indication of the renewed interest in the market.

Other analysts have indicated that factors behind the renewed interest are the falling yields on bonds, expected good performance by quoted companies and increased access to credit.

“The falling returns on bonds and renewed interest by financial institutions to provide credit facilities will eventually increase the attraction of equities”, said Onchera Maiko, the general manager for investment at British American Asset Managers (BAAM).

BAAM in its quarterly economic update indicated that the return on the equity market is at 25.4 per cent with the market still fairly valued at 14.5 times declared earnings compared to say the United States which is at 17.8 and Germany at 19 times.

Source:
BD Africa