Friday, March 14, 2008

Smart investing the Safaricom IPO

The financial part of the day is over with no announcement on the start of the Safaricom IPO; when it comes, should still not matter as chasing an IPO is a futile matter for a savvy retail investor. This is how it works - buy the shares after they list, not by queuing for hours around the block only to get 50 shares and 90% refund cheques.

All Kenyan IPO’s priced at less than 10 shillings have been greatly over-subscribed and this one which falls in that range could be the biggest.

So wait for the shares to list, and then buy. They may be floated at 10 shillings, and open at 25 - but have you lost anything? Not if you and 300,000 other shareholders all start off with 50 – 100 shares each. In fact you have a head start as you will have your money ready while the others wait for their refund cheques to be processed

What else to do;
- Buy through an investment club or a company if those groups get preferential allocations
- Buy other shares that may drop in price
- Marry a Safaricom employee, or better yet - get a job there and apply through the employee pool
- Use a reputable stockbroker stockbroker or bank

What not to do;
- Don’t take a loan to buy IPO shares.
- Don’t buy through multiple names/relatives/companies – you’ll have to chase a refund for each and consolidate after.
- Don't wait for the Econet option - I've being writing about their launch/imminent rollout in Kenya for as long as this blog has existed

That's what I'm doing: any other suggestions for maximum returns?


FAUX PAX
Ooops, spoke too soon - sorry Mr. Minister

Kenya sets Safaricom IPO share price at 5 shillings
NAIROBI, March 14 (Reuters) - Kenya is to offer a 25 percent stake to the public in leading mobile phone operator Safaricom at 5 shillings per share, Finance Minister Amos Kimunya said on Friday. Kimunya said the offer would open to the public on March 28 and close April 26. There will be 10 billion shares for sale. The proposed Safaricom sale may prove a key test of domestic and foreign investor confidence in east Africa's largest economy after negative effects of the post-election political crisis. (Reporting by George Obulutsa)

Still the math does not change. Assume a realistic 3 million shareholders, they can each get 3,333 shares each at a cost of 17,000 each - still means over-subscription, and that does not factor in any preferential allocations for corporates and employees, reducing the pool

18 comments:

Mashatall said...

You can also talk to fund managers who get preferential treatment as qualified institutional investor's, and stand a chance of getting a full allocation. Maybe buy into a unit trust or find out if they have a collective pool for safcom IPO only.Loans will of course be taken since kenyans do not really have a strong saving culture, and i doubt that a lot of us are seating on ready cash that can buy Safcom. Econet's rollout has always been pegged on the Safcom IPO if you have all not noticed, simple reason being that competition will be stiff once they roll out, and Orange (Telkom) enter the scene too. My advise though would be do not hold safcom long term coz i do not think they will ward off the competition that is about to ensue, and its only a matter of time before call charges come down and the huge profits they have been making will be no more.Am starting to lean towards Celtel already, love their marketing startegy right now and improved services.

tengeza said...

I have been waiting for this IPO for a long time. Though right now I am not sure if I will go for it. All I can tell is that the price will definitely go up after the IPO. The low price is meant to spur over subscription and interest in the shares.

All I now is that it is not worth keeping for the long term especially if Michael Joseph has to leave. All you need to bring a multi billion company down is a lousy CEO.

Anonymous said...

Have they set the date it'll start trading??

FoodMerchant said...

Banks, will take your advise and marry an employee..oh wait, I'm married already! Oh well.

Does anyone have any data on Safaricom? revenue, subscription rates, operating costs, income,growth rates, market share...really anything one could use to do a valuation? Personal request.

Anonymous said...

Marry an employee for a good allocation? This is a good idea. Kenyan have succesfully used this avenue to get "makaratasis" and associated benefits in western countries.

Anonymous said...

Very good post especially since it combines solid advice and humour. Wish all posts were like this.
I have def learnt alot.
Be blessed.
Hope the 'haters' woun't start mudslinging the NSE again.

just what? said...

any word out on when the prospectus will be out?

the employee route (marriage or otherwise)supposes that the employee in question will be willing to part with their allocation.

mwasjd said...

Interestingly I watched Citizen TV business last night and the Head of Research at Faida Securities (I'm not so sure) was explaining how Safcom will be like 60% of the NSE shares so it might not perform so well in terms of trading. I also know that India's mother of all IPOs (Reliance Power) opened lower (shock on wananchi who'd taken loans! But I'll still invest in Safcom, still mega profitable even 2 years later (competition not withstanding).

bankelele said...

dtnaMashatall: will wait & see the allocation and prospectus details. I don't think I'd qulaify as for preferential treatment with my broker.
Loans for sure will be out as they are considerd 'safe' for banks

Tengeza: the supply of shares in unprecedented - 10 billion! One weakness of MJ has been his lack of sucsession, and having a 'political' board - but it's something Safcom will have to deal with soon:

FoodMerchant: Having one wife has never stopped Kanyna man from missing an opportunity. Mistresses too will get shares, but under-cover.- dat I have is two years old, but their latest financials will probably come out before the prospectus

Anon: Tha haters will come out, esp. since all but two shares (Unga, EAPC) dropped on the day that the IPO was announced

Just what?: I believe March 28. I'm only judging the employee allocation angle going by the trend of previous IPO's

Mwasjd: all but 2 shares dropped on Friday and i doubt thaters another company listed with 1 billion shares available, let alone 10!
- The Reliance Power angle could be a realstic outcome here

Anonymous said...

I love this blog but this pull down ad makes wanna move away, fast.

Maishinski said...

Who will be the first blogger to leak the Sacom Prospectus?

No better way to reclaim the blogger rep as Number 1 source of info for investors (currently BDAfrica has the T-shirt).

Banks you up to the challenge?

dropmyload said...

Everyone is talking about 2 to 3M investors, yet there are only 1M cds accounts open as at now. So, to open say 1M more in 1 month, they need to open 50,000 a day assuming 20 days a month.

Not realwaqxiwistic!

Mashatall said...

Dropmyload,
We also have east african investors being treated as locals, so the 2M investors might actually shoot to 3M if ndugu zetu's across the border's develope appetite for the IPO.Also with good media hype and Agwambo's sleek marketing strategy of appealing to foreign investors, wall street will come calling heavily as they try to boost earnings after the subprime mess. Now if only the stockbrokers can behave and not poop the party by dipping their hands into the cookie jar! Then this might be the spark we need to get the economy back on track as we chase this ghost called vision 2030.

bankelele said...

Maishinski: No contest with BD Africa. I have no budget or access to the advisers.

dropmyload: I agree with Mashatall that 3m is possible. don't forget that prettuy much all bank branches and SACCO's will also hawk the IPO to their clients

Mashatall: we should exclude Tz since they don't reciprocate in IPO allocations, unlike Uganda who opened up Stanbic to Kenyans

dropmyload said...

Guys

3M CDS accounts is 3 times what is already open!

Given that Stanbic UG was 70% purchased by Kenyans, I would not expect too muc action from our ndugus across the broders.

As for Kenyans, to go from 1M to 3M CDS accounts, you need to open 2M accounts in 28 days from date of announcement to closure (Sat and Sun not included). That now coems to 71,000+ accounts a day, everyday. Essentially, 8900+ account an hour in an 8 hour working day.

Sorry, your maths is all wrong! It cant be done, physically.

Anonymous said...

SAFARICOM IPO AND FEFUND PROBLEMS

Safaricom IPO should provide an option for payment AFTER allocation if someone provides a bank guarantee.

This will cut down refund processing costs and minimize potential impact on the Financial market (e.g. liquidity crunch in banking sector and wild currency swings).

Central Bank of Kenya should be at the forefront lobbying for this important issue!

Additionaly, Retail investors should not all be lumped together. What about the High Net worth Investors? People like Chris Kirubi should be given incentive to participate (i.e. without worrying that funds will be held idle if there is a massive oversubscription of the IPO).

Gitts said...

good advice there. I pity safcom employees, thay'll become an endangered species!

Anonymous said...

You should anticipate an enormous oversubscription; people in remote areas need not travel to major towns to subscribe, PesaPoint is touted to be working on offering the service through their 100+ ATMs!

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