Monday, June 16, 2008

Safaricom @ NSE Day 6

Deals 5,624
Turnover 821 million shillings ($13 million)
Avg price 7.91
Closing price 7.90 (up 6.38%)
High 8.15
Low 7.70
Last 7.95
Shares volume 103.8 million shares

Commentary: The Bourse had a delayed start. It was a very bullish session. We are now toying with 8.00 and a break of which will project us another 10% higher- Courtesy of Rich.Co.Ke [NSE data vendor]

Lessons Learnt from Safaricom

1. Don’t invest in IPO’s! avoid the queues, time value lost, miniscule allocations, rogue broker tales, bank charges, fraudsters etc.
2. If you must invest, go for those with 'higher' minimum investments of Kshs. 50,000 or 100,000. e.g. Access Kenya a ‘relatively unknown’ (to wananchi) was priced at 50,000 and still ended up with 25,000 shareholders who got a reasonable allocation.
3. If advance payment is unfair for foreign investors and QII, it is also unfair for wananchi (retail investors)
4. Bank IPO loans should be banned.
Both of the above two factors destabilize the banking sector
5. We don’t need foreign investors. The local investors over-subscribed the entire allocation. The Renaissance Boss once talked about how it was not possible to invest $20 million without distorting the NSE. We are a retail, small corporate, local bourse and should accept that,
6. We don’t need the kind of foreign investors we appear to have got. African bourses need long term investors with three to five year horizons – not 3 to 5 day ones who cash in for 2 shillings.

ARM dust?
What happened at the Athi River Mining AGM last week? The vote results on the proposal to split the company into two subsidiaries appears to have only had the backing of the MD who accounted for almost all the votes for the move to be approved.

6 comments:

Anonymous said...

Great article, particularly the section about Ipo loans. There is a school of thought that such "financial innovation" has really lead to a lowering of risk adjusted rates of return on financial institutions in the United States, the mortgage loan crisis, being just one example.
I hope Kenyan bankers( I also hope the Central Bank) will read the following excerpt,
" Thanks to an inquiry by David Cox at Deloitte, we took a hard look at the risk-adjusted profits of the largest US banks and the results are disturbing, both in terms of the falling economic value added of this group of banks and the decreasing diversity among them in terms of business model attributes. More than any other comment, readers have remarked on the falling standard deviation among the top 100 largest US banks in terms of risk-adjusted return on capiral or RAROC.

Overall, our analysis suggests that the effects of deregulation and new technology have been negative for bank profits."
http://www.rgemonitor.com/component/option,static/inc,aboutus/Itemid,89/


As usual, great post, keep it up!!

Maishinski said...

Of course! I mean, how creative can a thief get when it comes to daylight robbery?

We all know banks are daylight robbers. Taking money from Peter and lending it to Paul at a higher interest than Peter's deposit interest - but at the same time charging Peter commissions for the most absurd of things.

Nowadays money is electronic. The concept of paper money is dying off. This of course means that we are right in the middle of a shift from the old-school banking paradigm!

Banks in future will be secure Data Centres rather than safekeeping havens for money. All transactions will be electronic and the concept of currency notes and coins will be eliminated.

Bank strongrooms will lose their competitive relevance - other players will be able to offer secure storage facilities for valables (jewelery etc).

Actually the bank of the future will be nothing but a centralized IT data processing centre - possibly government owned, covering the entire country, and offering services to all at zero or minimal costs.

The profile of Bank robbers will change from violent uneducated morons to highly skilled computer hackers and social engineers (identity thieves) - though "inside jobs" will be the most likely approach to banking crime.

..go back in history, see why banks exist - their fundamental business model; how sustainable is it - given the current technological advances an trends?

BaMM! There you go, an exclusive, and totally orignal peek into the future.. courtesy of Maishinski and Bankelele's Blog!

Anonymous said...

Hey Banks, no foreign investor in their right mind will have a long term look at a country that has a history of progressively worse political violence every 5 years.

What we have is a clear message from rational, unbiased (politically) thinkers, that our house - as it currently stands - is built of straw.

We may be in peace right now - but for how long? Our peace is not founded on solid institutions and systems - we are all counting on the goodwill of our blood-tainted politicians to hold our country together.

The same politicians were already positioning themselves and campaigning for 2012 - even before the people who died in January were buried.

Hitler, one of the most evil leaders on earth, was extremely charismatic and popular during his reign. His strategy of getting Germans to blame Jews for all their social problems resulted in the dreaded Holocaust.

Looking back, whats the difference when you compare Hitler's strategy to ODM's "Kenyans v/s Kikuyu" strategy meant at isolating and spreading hate against Kyuks?

People are burying their heads in the sand - no one wants to really think about our politicians' "win at all costs" strategy for 2012.

If the institutions that our leaders are now taking lightly fail to materialize - then citizens, having learned from 2007, will be ready for the worst in 2012.

May God have mercy on us if more have to die before Kenyans and the world recognize the Hitler in their midst.

:-(

bankelele said...

Anon: thanks for the reference, but RGE seem to have a low interest in Africa (a sub, sub-topic)

Maishinski: I thinks bank are addressing the low savings culture that we have, but coupled with the high desire for wealth and lack of viable affordable, less-risky investment channels – all lead to IPO’s
- M-pesa is showing some data redundancy of the banking model of statements and credit

Anon: ok, another ODM/Hitler tangent

Anonymous said...

Banks, I agree with you on many points especially No 2 & 3... however...

4. Bank IPO loans should be banned.
Both of the above two factors destabilize the banking sector

ANONYMOUS>> What is it with us Kenyans and over-regulation. I say let's have a free market, if banks want to lend for IPOs, so be it. Its their money, their risk and besides... they do their own credit assessment of whom they're lending money.

Furthermore, many retail investors have made profits out of this loans.


5. We don’t need foreign investors. The local investors over-subscribed the entire allocation.

ANONYMOUS>> I disagree.
Let's welcome them but let's not give them preferential treatment.

We need to increase the relevance and profile of the NSE. This will in turn attract even more companies to list and believe me there are so many companies (Kenya & E.A) as well as parastatals who can benefit from this as we benefit from buying/selling their shares.


BANKELELE>> We are a retail, small corporate, local bourse and should accept that

ANONYMOUS>> We can create a financial centre here that attracts even foreign companies to list here. Let's aim for the sky. Besides, not all foreign investors are big.


6. We don’t need the kind of foreign investors we appear to have got. African bourses need long term investors with three to five year horizons – not 3 to 5 day ones who cash in for 2 shillings.

ANONYMOUS>> Why is it ok for me to cash in on 5% whereas its a big deal if foreign investors do so?
Hapana (to quote Bw Kibaki), let's have mad volumes. Short or long term, all play a part in shaping markets.

Maishinski said...

@ ANONMOUS>>

Well said... The sky is not the limit. Let's aim for Pluto.

NSE (and by extension Nairobi) can quickly become the Financial hub of Eastern and central Africa. We're talking 3-6 years if our politicians mature quickly into intelligent human beings with vision.

Politicians are the only ones holding Kenya back. everyone else is ready to build our country!

The option of using Irrevocable Bank guarantees should have been availed to ALL investors.

Foreign investors will flip due to risk perceptions. Thats reality - we gotta deal with it.

Marketcap is everything. Safcom is shaping history by signalling the beginning of the end of the easily manipulated "penny stocks" era in Kenya.

I think the price of Safcom accurately reflects the "true market value" at that point in time. Not easy for unscrupulous players to manipulate this share!

:-)

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