Monday, November 13, 2006

IPO fizzle

No disrespect to the Eveready IPO which opens today, but there appears to be less enthusiasm for what it now the 3rd IPO this year after Kengen and Scangroup. There are lines outside stockbrokers today, and will be around for the next two weeks but nowhere near Kengen size.

Most of the fatigue comes from the over-subscription and resultant fractional allocations of shares to investors – each requiring several trips, phone calls and hours spent pursuing IPO shares.

Likewise to buy Eveready, I’d have to sell something or if I wrote a cheque i'd have to make several trips to my broker - who's normally super efficient. But at IPO time, things get hectic with the long queues and harried staff - payments/orders get misplaced or have to be corrected, and a second trip would likely be in order, followed by a third in a month's time, after the IPO results are known (11/12), to collect the inevitable refund cheque (after 15/12).

I may be better off just waiting to the shares to list (on 18/12) then simply send my broker an e-mail to buy the shares. Price volatility can be expected on day one, but with Christmas around teh corner, there won’t be much activity on the exchange and the price should hold steady (I hope) till January.

Careful banks: Unlike before when several banks lined up to offer loans to buy Kengen shares, they are still available, but there’s no marketing or fanfare announcing them. Also, while Kengen was sold on almost every street corner, this time KCB is the only commercial bank selling Evereyady shares.

Still I must commend some brokers who have opened satellite offices to process IPO applications, thus easing the crowds at their main offices.

BARS free
Barclays shareholders will endorse the sale of their BARS to CAPSEC of South Africa - in addition to a share capital increase, bonus, and share split at an EGM in Nairobi on December 8. Register closes Nov 29

No parking
The latest ludicrous proposal by city council is to double the daily parking fee from 70 to 140 shillings ($2) in order to finance the construction of parking garages. What the council should do is have a bond or enter an arrangement with a bank that will finance construction of the parking in record time and the council can repay the bank over the long term. The council would be ill-advised to finance construction using daily collections of which it has little control. The proposal also has no end date which means we could be paying double for the next 10 years, long after the project is over, or without any new parking garages ever being built.

Posta booster
There's a story in the East African today about how the Postal corporation will reap over 16 million shillings ($226,000) from Kengen mailing annual accounts and notices for their AGM on November 30. Kengen had to pay for tens of thousands of stamps and has budgted 80 million shillings ($1m) for the day.

Nyramid update
A prominent city Church led by a charismatic preacher is behind one of the newest Nyramids.

Tesco’s here
Tesco, a former partner of Uchumi has opened its own Nairobi supermarket.

Cadillac’s to Kenya?
Cadillac returns to Africa via South Africa with right hand drive cars which will then be sold to other Sub-Saharan African countries -with BLS, SRX and STS models arriving early next year. Geenral Motors has a significant presence in the Nairobi through isuzu truck and minibus sales.

22 comments:

Anonymous said...

who is your super-efficient broker? Mine (now former) is super-inefficient.

Anonymous said...

Eveready is no discount... IMHO, the P/E is high for a slow growth business.

I will do a brief write-up on it later.

Note that Kenyans love to do stuff last-minute thus the prospectus was late but I expect folks to start getting their forms in on the last 3 days!

Mashatall said...

banks.
Any idea where we can get the application form online? seems like CBA is doing a pretty shady job on this IPO, they have nothing online in this era of online investing. Will still buy into the IPO though and see where it goes, but with christmas around the corner it might tank, or might deliver a good holiday present if it doubles.

E-Nyce said...

bankelele, when you write "...we could be paying double for...", do you mean the 'royal' "We" as in "We Kenyans", or "Me"? In short, do you drive to work?

Tesco in Kenya?!?! Oh. My. God. What next, WalMart? Where is it located?

mama shady said...

what!tesco!thats not good!at least idont think it is!i wonder what strategy theyll use to get us hooked!i hope that kenyans really lenga them but clearly seeing as they offer things like job creation etc...sigh

Gathunuku said...

Tesco? Is it the TESCO, the UK's largest supermarket chain?

pesa tu said...

It'll be great to have Cadillac here.By the way was at the coast and saw the new HUmmer H3(Left hand drive of course). I've also seen a couple of Jags- S type and a Crysler 300C. I wonder how the Kenyans who drive them maintain them since there's no dealer support for those makes here.

pesa tu said...

Eveready is a good buy(for the short term) as long as they shut their local plant and import their batts for sale

coldtusker said...

Local Tesco - no relation to UK Tesco.

Kenyan businesses often look to UK names for inspiration! I found a "Debenhams" on Moi Ave!

bigroad said...

Pray Banks, who is this preacher behind the nyramid?

bankelele said...

Anonymous: join the club () - I use CFC

coldtusker: No doubt many wlll g for the minimum and the company could end up with 50,000 new shareholders. I'd like to see them get into things for future growth. e.g. I mean I haven't bought a SINGLE battery this year

Mashatall: I'm sure forms will be online by the end of the week. D/L is 24/11

E-Nyce: I drive most days. Tesco is between Moi Ave & Tom Mboya ave (across from where Ebrahims burnt down)

mama shady: the more new business opening, the more jobs and the better we all are

Gathunuku: no affilication

pesa tu: Jags are plenty, saw a hummer on Mama Ngina last month. DT Dobie services chrysler jeeps, I dont know if they also do the 300's (only one i've seen belongs to S. Korea Embassy)

coldtusker: Other names adopted - notorious club called Taco Bell (on Moi ave) and Subway (in Panari center)

bigroad: I don't want to be struck down. ask around

Anonymous said...

i have a strange feeling about eveready, even the timing doesnt appear right coz its set to compete with real firms like mumias and kenya re and also the festive season not to count the back to school! however bottom line, the business doesnt look it. pple expect oversupscription, but that only happens when fund managers have interest which this time my not be likely

roughalmasis said...

I doubt there is fatigue as IPO results might show. Agree the service inefficiencies are scaring. I shudder whenever I think of those Queues. Despite past disappointments people will still vote with their feet.

KenGen was on a class of its own though and only Kenya Re might come close. Safaricom might rival it if it ever materializes(todays standard on Vodafone). Factors: 1. name recognition(proximity to prospective investors). 2.Geographical spread of agents(KCBs network). On these factors Eveready might overtake Scangroup). 3. Stability(Government ownership brings sense of security). Same reasons why loans are not being offered.

Current investment surges are more on momentum(judgement) than fundamentals. Its more of human variables and inputs rather than quantitative certainty(see todays analysis Smart Company, Nation on NSE index). Further challenge on fundamentals - In Smart Company NSE Equities PE ranges from a low of (minus) -104.17 Eagaads to a high of 102.26 City Trust. Dividend yield – Low 0% to a high of 7.09%.

People will buy(speculate). Price right though by market levels. Expect price to double.

Ken said...

I think the IPO will be oversubscribed especially considering that they only intend to allocate around 40million shares to individuals and 18,900,000 shares to institutional investors, who in my opinion are currently very liquid.

The fact that the brand and the business is widelly known in the country will also attract more retail investors.

Anonymous said...

Guys,

I am looking for an effecient broker with a good online system for managing CDS a/cs. any recoms?

sijui said...

I just read that Barclays is coming out with a "bold, visionary, expansion programme" much hyped by Adan Mohammed. He let a few morsels slip...they are agressively going after the lower end market i.e. chasing after Equity's clients.

I look at this with cynical optimism, the market has forced them to innovate in the face of mounting profits being accrued by their competitors, especially those servicing the real mwananchi's needs. I am curious to hear your thoughts. Any insider information on what's afoot? All in all, the market rules! Long live capitalism!

Ssembonge said...

There is a huge market for batteries as the world moves towards electronics products.


Tesco (UK) branded products are available in Kenyan supermarkets. I once saw their canned veggies in Nakumatt.

There is a lot of potential in Kenya for supermarkets. Right now the retail sector is very fragmented with Nakumatt commanding the biggest share of the urban population.

How is Uchumi fairing?

mwasjd said...

Banks: Huna remote, wall clock ama digital camera? All these use batteries... Also, I thought you banned anonymous posts, what happened?

I'm thinking Eveready is a well know brand. The fact that we aren't seeing super long queues was that during Kengen, this was a new phenomenon. But I guess it's no longer big news, so the IPO fatigue thing might also be a factor. I'll get some end of this week, hopefully avoid the early and late rush.

Anonymous said...

ssembonge: Surely, you are not joking!

Tesco CANNED veggies in Kenya???

WTF... we export fresh veggies then import canned crap!!! Who buys these veggies???

bankelele said...

Odegle: Am looking at Diamond Trust & Family Fiance in addition to eveready now.

roughalmasis: It's sad to queue for hours, get 1/5 of what you expected/paid for and have to queue again to get a refund cheque - and that's if you get good service!

Ken: I forsess over-subscriptions given the price. If you apply for 1,000, you'll get 3 - 400

sijui: they have to go rural to get cheap deposits like KCB and Equity

Ssembonge: I'd like eveready to go into solar cells

Uchumi seems to be doing fairly, many shoppers, but baskets smaller than Nakumatt. Not much public financial info since the shareholders loan fizzled

mwasjd: TV remote only but the charge they use is so low, I think they have the cheapest battery inside (not eveready's) - and they have not been replaced this year

coldtusker: There's canned and imported everything and anything in Kenya from crisps to vegetables to meats and juices - some people are able to get them in cheaper than local products

xtra-cash said...

Coldtusker.. yes people will buy crap as long as its imported and probably cheap because of tax evasion. So don't be suprised.

Anonymous said...

xtra-cash - What idiocy.

In the UK, at Tesco (& Sainsbury), Kenyan fresh produce constitutes a large percentage of their produce section esp green beans, crougettes & flowers.

Are these "canned" veggies produced in Kenya but didn't make the cut for export thus off-loaded on the Kenyan market. That is acceptable.

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