Tuesday, May 27, 2008

IPO daylight

IPO hangover: Went to visit stockbroker today in an unsuccessful search for the elusive Housing Finance prospectus – and instead found several notices on the wall:

- no mas they have suspended opening new CDS or receiving transfers from other stockbrokers for a month to 30/6( until they sort out their applications post-Safaricom IPO applications)
- investor awareness they advise how investors can watch rogue trades in their accounts and how to report them including getting correct address in the system. They also assure customers they are with a solid stockbroking firm that has over 40 billion shillings in assets
- cost increases - nominee accounts will now attract quarterly fee and transaction fees over and above commissions costs
- 1/2 way to DRIP: they will no longer en-cash dividend cheques, but they can be endorsed towards new purchases of shares.

Oil and manufacturing: Looking at the price warning from Sameer Africa, makes one wonder about the impact that the escalating price of oil will have on manufacturing based company shares (e.g. cement is up about 40%) - and whether it is wiser to invest in ‘service’ companies like Safaricom whose impact from oil prices will less direct (share of wallet)

Full year results
- Safaricom revenue to 61.4 billion [$990 million] (up 29%)
- Safaricom pre tax profit 19.9 billion [$321 million] (up 16%)

Petro Politics & Policy: Reading Thomas Freidman’s columns can scare any one cares about the future of America, foreign policy relations and other manufacturing industries.

Writing recently, he notes:

- The failure of Mr. Bush to fully mobilize the most powerful innovation engine in the world — the U.S. economy — to produce a scalable alternative to oil has helped to fuel the rise of a collection of petro-authoritarian states — from Russia to Venezuela to Iran — that are reshaping global politics in their own image.
- If this huge transfer of wealth to the petro-authoritarians continues, power will follow. According to Congressional testimony Wednesday by the energy expert Gal Luft, with oil at $200 a barrel, OPEC could “potentially buy Bank of America in one month worth of production, Apple computers in a week and General Motors in just three days.”
- America has taken its many natural assets — its research universities, free markets and diversity of human talent — and assumed that they will always compensate for our low savings rate or absence of a health care system or any strategic plan to improve our competitiveness.
- “Call it the triple deficit,” said Mr. Rothkopf. “A fiscal deficit that will soon have us choosing between rationed health care, sufficient education, adequate infrastructure and traditional levels of defense spending, a trade deficit that has us borrowing from our rivals to the point of real vulnerability, and a geopolitical deficit that is a legacy of Iraq, which may result in hesitancy to take strong stands where we must.”

11 comments:

Anonymous said...

Thomas Friedman also predicted that the war in iraq would be a good thing for America. He lost all legitimacy after that prediction.

Anonymous said...

safaricom earnings to profit ratio is high. very high this guys are minting money - 30cts out of every dollar they make is profit. - something has to give.

kenya.fm said...

Nations rise and fall. It is historic. If America's time has come, behold it will fall. No need to worry, the world will continue, in tyranny (with the said states) or in short period of peace (with the EU). Unfortunately, America's fall might happen during Obama's leadership, and so the scape- goating and any existing prejudices or stereotypes will be "justified". It is a win-win or lose-lose situation, whichever way you look at it.

MainaT said...

Ati they are closing out new applications for a month! Sounds like refunds will be long in coming...

On the other hand, its good to see brokers getting proactive about re-assuring investors. Next step as proposed is to publish quarterly results.

Anonymous said...

Wow 20 billion?

Anyone who sells their safaricom shares at less than 1US Dollar (60/=) is an idiot.

Maishinski said...

In case you missed it, here's a link to CBK response to stagflation. As usual the following phases of response will occur:

Phase 1: Denial.
CBK is currently arguing that everything is fine and that effects of post election violence can be quickly brushed aside and also that 26% inflation can be easily tamed even when there is a general lack of investor confidence.

Is empty rhetoric enough to fool the economy back to life? Lets wait and see.

Phase 2: Anger
CBK and politicians will soon lash out at anyone suggesting that Kenya is facing stagflation. They will cite safcom IPO as an example of a vibrant economy. Watch the media in coming days.

Phase 3: Depression
CBK and treasury will go underground for a while - confused as to why lowering interest rates seems to make things worse!

Phase 4: Acceptance
CBK and treasury will recognize that stagflation has, to some significant extent, gripped the country - irrespective of what triggered it. They will set up a team of "ëxperts" to identify best course of action...

Phase 5: Action
Lets hope this happens before the budget is finalized and read. The sooner CBK plucks its head from the sand the better for us all!

http://www.bdafrica.com/index.php?option=com_content&task=view&id=7897&Itemid=5813

MainaT said...

Stagflation is when you have an economy slowing down and suffering from rising inflation at same time. We clearly had inflation rising too fast up to April. However please note that up until Dec, inflation was at a manageable 11% mostly due to high money supply ala to higher lending. Thus it’s true to say that the rise since then has been supply-side in nature. GoK has already started buying up some of the food supplies to bridge the supply gap. Barring any droughts, inflation should be back to the late teens or lower by October. But the real economy is growing.

Maishinski said...

Safaricom:

EPS = 19.9b/40b=0.5

P/E = 5/0.5 = 10

Post IPO Price Prediction: Between 20/= and 30/=.

bankelele said...

kenya.fm: perhaps its time, nothing last forever. I think any of the candidates would be considered an improvement on the Bush II years

MainaT: I’m sure they have to input all CDS in their internal system
- I’ll visit other brokers as well

Maishinski: I like reading the Governor’s statements from the CBK site, though it has a lot of downtime these days
- looking forward to safcom results. I predict gloom for QII’s

MainaT: Safcom gave a lifeline to many banks in April as they did not know where to lend.
- But I don’t think GoK buying of food will have any impact on supplies

adam cartwright said...

MAISHINSKI i think you fell into the trap of using the gross profit in order to calculate earnings. me thinks because safaricom has very high financing costs and other 'cost repayments' that are done as a percentage of turn over then the bottom line is actually what mattes to the new investor.... if u end up with a most likely allocation of 610 shares as a minimum, then from the two billion shilling dividend declared, each share ends up with 5 cents and this particular investor ends up with a cool investors dividend cheque of about 30 bob ie... 2bil/40 bil= 0.05x 610=30.50

it costs at least fifty bob to process dividend cheques, even where they are done for free eg post bank. what will they do? sambaza or m-pesa the dividend.

then there is the new price war, by september revenues from voice and sms in this sector will be severely constrained even if safaricom has a caveat emptor requiring u to load up with at least one hundred bob to enjoy the free airtime at night. plus their network will really clog up at the news and with kenyans queer calling habits.

Maishinski said...

Thanks Adam C!

Net income 13.9b

EPS = 13.9b/40b = 0.35

P/E = 5/0.35 = 14

Post IPO Price Prediction: Still between 20/= and 30/=.

PRICE WARS:
Safcom have utered the secret magic word "FREE". Celtel doesn't have volumes to sustain its onslaught... Direct competition with Safcom? Bad move for Celtel.

Its like a fight between Mike Tyson (in his prime) and Sospeter.

Sos.. who? Who the hell is Sospeter? EXACTLY. No match.

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