Sunday, April 22, 2007

Access Kenya IPO

IPO season is on again and this time its Access Kenya - a leading corporate ISP and telephony company.

Am yet to see the full prospectus, which should be an interesting read to see the trend of share capital and profit adjustment that is alluded to in the abbreviated prospectus published in the paper on Thursday – the day the IPO started.

The company has learnt from the Eveready listing and set out to limit shareholder numbers by setting a minimum investment for retail investors at a moderately high 50,000 shillings ($715).

Industry: The communications sector has so much happening now from - unified licences, the Wananchi ATC deal , Telkom SA/AfOL deal, Telkom Kenya re-engineering itself, EASSY vs. TEAMS cabling, fibre optics everywhere and of course Safaricom at the top of the food chain who have continually reinvested much of their record profits towards infrastructure expansion.

Investments in the sector are not cheap and with technology rapidly evolving, the 400 million shillings that will accrue to the company may not be enough for more than a few years at a company that starts off with a marginal balance sheet.

IPO results will be out in May and shares will be listed in June 2007.

Other opportunities

from the daily papers this week


Coca Cola - East & Central Africa business unit: franchise marketing manager, hospitality manager, operations marketing representative, financial services manager financial accountant senior brand manage (2) revenue growth manager commercialization manage (2) strategy development manager, human recourse manager compensation & benefits manager quality improvement manager

Apprenticeships for mechanics at DT Dobie: applicants must be under 22 with good grades in maths, physics, English and apply in handwriting by 11/5 to DT Dobie Training Center p o box 30160-00200

Safaricom: head of customer management, head of retail. Apply to

Soon you can dine in the skies as the Kenyatta International Conference Center has set out to revive its roof top revolving restaurant on the 27th & 28th floors of the building.


inexes said...

How is access kenya IPO going? Any long queues for the shares? Any indication of subscription rate yet?

coldtusker said...

Kenyan investors always stampede in at the last moment... makes sense coz why lose 1 week's of interest income by applying too early?

Maishinski said...

1.a. If growth prospects are so rosy, why have the owners chosen to cash in (over 40% of IPO proceeds goes into their pockets) rather than invest it back into the business?

1. b. The directors have paid themselves over 129M in the past 2 yrs. Why wasn't this ploughed back into the business expansion as a show of confidence? Beats logic.

2. The net effect of the so called "Lock-in" which only applies to a portion of shares held by two directors?
"(Page 67:)Directors Lock In Deeds dated April 12 2007 entered into by Jonathan Somen and David Somen in favour of the Company under which each of the Jonathan Somen and David Somen have undertaken to AccessKenya Group that they will retain a minimum of 30,000,000 and 10,000,000 shares respectively"

3. They havent shown a plan for EASSY readiness. No "plan B". What will it cost them if it becomes necessary to Migrate to Fibre to survive? (contractual penalties with satellite providers, equipment costs, maintenance contracts etc)
"(page 56. f.) The Group believes that it is unlikely that tested and reliable international fibre will be deployed until some time during the year 2008, and that the difference between the fibre pricing and the cost of satellite bandwidth based on the quantities the Group will be buying will not be particularly significant by that stage."

4. Future strategy - (Page 43/44) contradicts with section 8.18 (page 70) and 8.23 vii(page 71). What is the growth and expansion strategy based on????
"There has been no significant research and development of new products or processes over the past three financial years."

5. Page 53 "Outside the Group's core business, there is a significant market available, and therefore successful execution of strategy should stand the Group in good stead to gain market share." How do you know if you have not conducted market research?

6. Page 81. Have a look at the "Administration expenses". Over 500M utilized in the last 2 years as Admin expenses - yet the company has less than 140 staff! Unless there's a good reason, this is lousy cost management!!!!

7. Company has about 100M worth of Assets. No plans to acquire additional assets. If it liquidates for some reason, each share will be completely worth less.
"8.23 (page 71) Save for the acquisition of the AccessKenya Subsidiaries no significant material assets have been purchased by the Group in the last five years, nor is it proposed to buy any new assets in the near future;"

8. And why is the Prospectus orgainized in such a confused manner with unecessary repetition an mixed up information? Why was it released at the last minute?

I eagerly waited for this IPO. But after going through the prospectus - I've concluded thet the risk is too high. even for speculation. 10bob is too high for this share - and with rogue brokers on the loose (some - not all, but you cant tell until you're stung!) , there's no guarantee of a quick exit in the first 2 or 3 days of trading...

Why should we get in when the owners are getting out?????

Sijui said...

I am liking the developments in the sector especially:
1) granting of license free band spectrum.......much kudos to GK on this one! Thinking outside the box
2) and the massive private equity deal at Wananchi Online! Transitioning to a telcoms company.......exciting stuff indeed. $ 28 million is a good chunk of change, aluta continua :)

Its fascinating how AccessKenya is taking a completely opposite strategy.......may the best man win, Kenyan consumers in the meanwhile can reap all the benefits of these tectonic shifts!!!

KE said...


Very impressive analysis (you even have {gulp!} page numbers inserted)

That's why blogs are becoming popular. How many people are going to sit down and go through a prospectus? But by reading blogs, we can all get a nice, short synopsis from people like you without having to bore ourselves with that kind of reading!

Mashatall said...

Good analysis Maishinski, i went through the prospectus and could not discern any comparative advantage that would make me invest in the IPO.With no fibre optic backbone of their own, they will not be able to survive the onslaught of Telkom,Safaricom and Wananchi telecom who are at least talking of rolling out a Wimax solution.I concur with you that the family just wants to bail out early and cash out in a Sameer led Eveready IPO startegy.I hope the Institutional investors plow into it, coz i feel sorry for our retail investors who do not do enough analysis to enable make them good investment decisions.
If Kenya data networks was ro list then i would buy into it, reason being that they do have a backbone that will see them carrying internet traffic for a long time to come, dont see why i should buy into an ISP riding on a backbone built by other entities, this reminds me of the Vonage saga.The shares have lost so much value that the CEO who had earlier bailed out had to come back and run the company, lest the SEC goes after him for bailing out on investors.

njoki said...

@mashatall - you've hit the nail on the head with your point . Apart from the PDNO - Blue , the group does not have a product that they can fully claim to own . And whats more , Blue's reach does not even come close to a third of KDN's and Telkom clientele

no-spin said...

Nice job Mashinski. I was thinking along the same lines but you articulated it better. I was planning to buy this as a trade but I'm afraid I may not be able to dump it at a desirable price. And you're right about the money. If the Somens' were so confident in their company, why take such a huge chunk of the IPO money?

alexcia said...

Are seeing a case where bloggers will actually aborted an IPO?

Do they have any bonds?

Hoseah said...

You have all stated great points, and though I agree with most of your analysis I am glad that this company has listed on the exchange. We need more companies to list not only to spread the ownership, but to also demand better management. As a private company Access does not have to worry about expenses if they are bringing in enough revenue to cover the expenses and also make the few owners great returns.

Té la mà Maria said...

Hello I am visiting your blog-Web and I like much. Congratulations

If you want you can visit ours, one is but irreverent and iconoclastic blog of the world, and one is in Catalonia - Spain

Thank you very much


bankelele said...

Inexes: Not seen the queues yet, but its also raining a lot

Coldtusker: I think we are just procrastinators. Note that interest income is so little.

Maishinski: I suppose it’s only fair for the sponsors to get something out of the company after their many years of hard work.

I have issued with the sector, EASSY may change everything or never come to fruition, Safaricom may decided to go for corporate data in a major way, there are 3 or 4 fiber companies in Nairobi etc.

I agree with you in that there is very little concrete information about the communications sector – with a lot of numbers coming from the companies them elves e.g. analyse Accesss Kentya’s 32% share of market statement

Financial: I found their balance sheet rather weak – net current assets were negative until 2006. But unlike scangroup, the intangibles of an ISP are not quantifiable. On the P&L, the admin expenses seem to have kept pace with revenue. Unfortunately they have not been broken down, anywhere in the prospectus, and theses (indirect costs) are something the management should control to increase profits year after year

At the end of the day, the company is an ISP and these have been hot and cold for shareholders the world over. It is not easy t o deliver consistent growth and returns year after year for an ISP.

Mashatall & Sijui: many changes in the sector, but can a representative company such an ISP deliver consistent growth and returns that NSE investors demand? If not the company’s share price will be hammered by short term investors

KE: impressive indeed. The prospectus is a 120 page document written in legalese that not many will peruse. At least the abbreviated one was in the paper on April 19,

Njoki: Well they are successful and profitable, but that is no guarantee that it will continue in the fast changing sector

No-spin: D&B predict not much change in price in the short term and that you should hold it for the long term i.e. if you buy

Alexcia: no chance of that. We are not trying to sabotage an IPO – we are investors who buy shares, read prospectus’ and know the sector. That’s all

Hoseah: True we need more companies and this is not intended to be a beat down. It appears that the prospectus glossed over some fundamentals in this case

Té la mà Maria: welcome

alexcia said...

@ banks

Of course not, i am not suggesting sabotage, rather, that bloggers are begining to exercise influence and market power


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