Thursday, December 07, 2006

Stanbic IPO

This week I made a my first foray into international investments (since a short lived stint with T. Rowe price mutual fund) by signing up to buy shares in the Stanbic IPO(Uganda).

Earlier this year a cement company had an IPO in Tanzania but that was not available to Kenyans while the Stanbic offer is. Though earlier marketed as being exclusive to Dyer & Blair (D&B) customers, other brokers have forged links with Ugandan financial institutions to enable more Kenyan’s to participate.

I paid 3/= per share at CFC (plus a 750/= processing fee) while a certain wealthy investor/dentist informs me that D&B has them at 2.85 each as does African Alliance at the same price.

Still there are some risks of investments mentioned in a D&B analysis including limited trading days at the USE, no CDS system (we'll get paper share certificates), power rationing could negatively impact company loan repayments, and the Uganda shilling may depreciate against the Kenyan one. Also dividends will be paid in Uganda shillings (1 KES = 26 Ush) but at least they can be repatriated in full as movement of capital is free.

Stanbic is Uganda’s largest bank and is rated as the highest quality stock ever offered on their stock exchange.

18 comments:

Anonymous said...

Banks in the short term, I think the Ugandan shilling will gain against the Kshs as we send our millions over to Ug.
We have to wait and see what the refund figures will look like.

Anonymous said...
This comment has been removed by a blog administrator.
Mashatall said...

banks good investment.had a stint with Trowe price too and got burn badly, and that was the turning point for me as an investor, now i do not pay anybody to do the research for me. Stanbic might be the gem that everyone will overlook while going for Mumias.Which of course will be oversubscribed, and will tie guy's capital for like a month.rean in the east african about a dude who paid $153,000 for four million shares on the first day.Am buying heavily and hope its the one share that gets to give me a home run early next year.Could they be beefing up their money vaults to make a play for national bank??

stevo said...

Im ndani on this one. good fundamentals,markket and branch network;can't possibly go wrong at 2.85/share... this is a Peter Lynch kind of stock and a potential ten-bagger within the next two years. thats $20k for me!

E-Nyce said...

bankelele and others:

Would you be willing to do a report on, or point to links that detail, where this great influx of disposable capital has come from in the Kenyan economy?

When did this boom occur? Where is the money coming from? Is it legit, or are we into the (positive?) after-effects of another major scandal involving the Central Bank? Or is it just my reading too much into yours and few other blogs of middle-class Kenyan residents (citizens or expats)?

I'm longing for something failry detailed, not just biased conjecture.

True story: while in Western this summer, I witnessed this ordeal - a friend of a friend of a friend's wife was arrested on some pretext. We learned from the frantic husband that - get this - some police officers got wind that the wife had cashed in some stocks for several hundred thousand KSh, and so they wanted to get a piece of that.

I wasn't too shocked by the ordeal, sad as it was, as this is Africa. What moved me more was: an "average-jane" Kenyan owns stock??! When did this happen? Where was I?

So I don't want to derail this posting. If we can all discuss this in another one, that'll be supreme.

bankelele said...

Ken: I see the Kenya shilling get stronger next year

Mashatall: T-Rowe price was also when I realised that research reports advice etc. are suspect. But America has such a large market that sometimes some guidance is required to find gems, while Kenya with about 50 listed shares is much easier to track for investment and performnmance

stevo: I'm taking a risk, but we'll have to go regional at some point and Stanbic is probably the best share in UG (till MTN comes along). We'll see how it goes and discuss again in Dec '07, hoping it is not over-subscribed and our money gets stuck for months!

E-Nyce: Let me get my answer in befor the politics. I have been to numerous AGM's and I have been amazed by the variety of investors. Rural investors have been buying shares for years (most Kenyan IPO's have been massively over-subscribed though the 80's), buyin & holding shares, living for the dividend, bonus and AGM treats. The urban shareholders have woken up to this more recently as real estate has become more risky and problematic. Before Kengen, there had been no new shares in 5 years and now with IPO first week returns people are taking money away from savings and other investments to buy shares (to sell if/when they triple). Maybe in a few months KIPPRA or the Central Bank will warn of the undue weighting of investor funds and risk in the NSE but for now the bulls will keep running.

Unyc said...

These shares business has me totally confused. I want to buy my first shares in Jan (God willing)but everytyme i ask around i get diff info. I read ur blog, read the papers...cant figure out which company 2 start with.
I want 2 open a CDS account but dont know with who. Suntra maybe...

Jaime said...

Am definitely buying Stanbic 2.85?!
unyc: Do your research then do what you want.I was in your place early this year.you could start with the IPOs coming up.
bank:when is the MTN one coming up and do you think it'll be open to Kenyans like Stanbic?

Anonymous said...

Banks: I too think the Kenyan shilling will get stronger against the Ug shilling in the long run. I tend to think that to some extent wit ill upset earnings from this stock.

e-nyce - The bull run has been going on since around 2002. Most stocks started a gradual appreciation and people seem to have caught on in the last 2 yrs and fuelled the market with crazy optimism.

The cash comes from many sources but of interest to note is the Kenyans in the diaspora: The Government estimates that the Kenyan Diaspora remits close to $600 million every year to their families and for Investment purposes.
checkout http://www.kenyans4kenya.com/

Gerald said...

Banks in your opinion, do you think NSE is about to crash considering the rising performance of market index?

Mitzy said...

There are a few gems in the USE, Uganda Clays Ltd being one of them. Since its IPO in 2000, UCL has experienced a phenomenal 463% rise in share price from $2.2 (Ush4,000) in January 2000 to $12.2 (Ush22,530) as of October 5, 2006.
In anticipation of the Stanbic IPO, interesting how there has been no trading activity at the USE this past week.

Outfoxed said...

Banks, i've bought stanbic already.
From the queues i saw at D & B, Kenyans are going for it heavily.

See my blog below
http://outfoxed-tiss.blogspot.com/

My worry is that the Ugandan authorities might shift the goal posts during allocation when they realise that Kenyans have applied for over 40% of the shares on offer to the exclusion of Ugandans.

What do you think?

Mitzy said...

@ Outfoxed, in the likely event of oversubscription, they have indicated that preference will be given to Ugandan nationals. Kenyans are not the only foreign investors looking into this IPO. With someone like Ibrahim Kabanda, the board chairman of Uganda Revenue Authority (URA), paying Ush280m for 4 million Stanbic shares, I foresee Kenyans being shut out.

Anonymous said...

jimnah mbaru is going to be the richard grasso of kenya as sure as the sun rises the NSE is going to crash one of this days and the people will demand for blood.

instead of using he's position (together with other directors) to enhance and increase transparency in the stock exchange they have chosen to profit from the current boom and have chosen to make changes only when they can directly benefit from them. Most of all mr mbaru should have learnt from the days of Jimba credit - the public perception will not spare him. so i urge him to act
to secure he's legacy.

The NSE's market cap is $7 Billion dollars. why do we let such mediocre management handle that kind of money .

Anonymous said...

I dont agree with anonymous on the fact that the NSE has not made any improvements on the capital markets. The amount of investor education given, the commitment to clients etc while still a small organization is quite commendable.
In the event the NSE is still just a trading place and indeed the market regulator is the CMA.
With all the moves to automate the delivery and settlement, trading etcin just a few years is proof that indeed work is being done.

bankelele said...

Unyc: Start with the Kenya Re IPO next year, but open a CDS account (which is free) first with any broker (preferably one you know)

Jaime: MTN not planning anything yet

Ken: Cash has been coming from the diaspora for years, some wll used, some to assist families. Kenyans in the diaspora are now looking to invest money in better ways than just sending them to relatives

Gerald: Correction/colling down, but not a crash

Mitzy: Thanks for the info. They say the USE is not very liquid but I expect Stanbic to be very active

Outfoxed: D&B separate queues? wow. 70% will be reserved for Ugandan's if it is over-subscribed

Anonymous said...

I am talking to my broker about getting stanbic shares but I read earlier today that the minimum investment for foreigners (Kenyans included)is 10,000 shares which translates to ksh 28,500 or 30,000 depending on which dealer sells(can anyone confirm this?). This sounds high so I'm pondering the short term and long term returns.

Another interesting note, I read that bank of America (BA)is trying to buy out Barclays at around 60 Million Sterling pounds. I'm wondering if barclays will first sell its African operations to ABSA of SA or will BA acquire those too. The latter situation could result in the BA undercutting local competitors in Kenya by introducing low interest rates (great for the local banker but what about shareholders in local banks, profits dip maybe?)I've heard others express concern on ABSA acquiring Barclays Africa due to the castle lager debacle some years back; they fear a mass exodus of customers from barclays into others such as KCB and stanchart (and dare I say stanbic)should ABSA neglect to tailor its services to local customers..The barclays scenario intrigues me because it could have a ripple effect on the banking sector. Thoughts anyone? I'm a techie with no solid banking foundation and I hope someone in here can school me Please write me at Kenyanboy21@yahoo.com
Thanks

Jakarumba said...

Incase of an oversubscription and then Uganda resorts to some form of protectionism then it will be unfair. I think such protectionism should be right from the outset, then Kenya should also reciprtocate in the forthcoming IPOs. That will be a stepbackwards from merging the two bourses.

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