Tuesday, October 28, 2008

Bank Tales II

Maina T kind of started this thread with a review of the P/E correction of Nairobi Stock Exchange (NSE) shares.

NSE: ½ full or ½ empty? - to take it further, how are NSE shares today compared to last October? If you considered them fairly priced then, you are frowning today, but if you considered them over-valued, are you smiling today?
estimates
- Shares that have appreciated since October 2007: 4% - BAT Scangroup, 3% - Access 3%, 1% - Unga
- Shares that have depreciated since October 2007: (83%) – Mumias (74%) NIC (59%) Nation Media Group, CFC (55%) - Housing Finance, (53%) – Sasini (51%) – Kenya Airways (47%) - Sameer (45%) – Kengen, Centum (44%) - Eveready (43%) - Williamson (42%) – Express, Jubilee (41%) - KPLC, Kenol
- Banking sector: Best (4%) - NBK, worst (-74%) - NIC, sector average is -32%

Interesting that despite the world financial meltdown of late 2008, the Kenyan financial sector is faring no worse than other sectors (agricultural, industrial) which are all down approximately 1/3,and remains the sector most likely to produce super-profits again this year. Best performing sector is commercial services (excluding Safaricom only listed in June 2008) which is down 20% from a year ago

Cheap M&A The depressed NSE prices bring out good and bad banking opportunities.
- Good for anyone speculating on buying into a Kenyan bank. The Helios stake in Equity is priced as almost what it was when the deal was signed, while the CFC/Stanbic merger is worth ½ as much as it was a year ago.
- Bad for the Government who are hoping to raise funds from further sale of NBK and Development Bank of Kenya share. It also raises a question of how Co-op Bank IPO shares will be received i.e. if you enter a train going down hill and you want to go up hill, where will you end up?

Family Bank a recent stockskenya discussion could indicate that a listing of shares could happen soon.

EADB: sad tales on the East African Development Bank.

12 comments:

Maishinski said...

coffee? Tea? Co op IPO?

No thanks!

MainaT said...

The glass might be half-full but upside down.

Seriously though. For the sake of those who have never gone thru a bear market, a huge dose of realism is needed.

Anonymous said...

Certain banks e.g. KCB is looking very yummy at this point...

ka-investor said...

I consider any portfolio appreciation below 4.5% to be no gain because it only represent what you pay as commissions to brokers per transaction cycle. So generally we've made no gain since October 07.

After breaking several 'decisive points', at what point do you think the NSE will bottom out?

coldtusker said...

The concept of an index bottoming out is WRONG. As is you can't buy indexes in Kenya.

Look at certain stocks. Are they a good buy? Would you buy them if they were a private venture?

I like KCB. It is trading at a low P/E. And I mean what I think is a low forward P/E. It can afford to pay 1/- (6%) in dividends & keep enuff in its pocket to grow further thus increasing FUTURE dividends.

coldtusker said...

Another is KQ. 30/- but trading at a substantial discount to NAV. They have fuel hedges at higher costs BUT these are 'history' tho will affect future profits as they burn off.

Can (& will) they lock in $63 oil?
Will the KES remain weak to the $ (major expenses except labor are in $)?
Will revenue remain steady (90% in US$)?

3nspeaks said...

I like cold tusker's view of looking at specific shares.

Even when the share prices have deteriorated fundamentals for historically strong companies like EABL have not changed (save for summit entrance into the market).

If one is a long term investor this has to be the time to purchase blue chip stocks at discounted rates - assuming you rate their current prices as undervalued.

@ka-investor, you also have to factor in dividends yield % when calculating gains and losses. Some companies i.e EABL, Mumias, KQ, Kengen all have above 5% yield.

Larry Mads said...

SO SERIOUSLY DOES ANY ONE KNOW WHEN IT WILL BOTTOM OUT?I really and i mean really track this market... i opted o put in a 10 figure with several zeros hf after its so called fundamentals said it should rest at about 19.25.. i came in just a few cents earlier and it hasnt stopped dropping since then... its like the bottom fell out.... me i would i advise anyone that this is ahold mkt not a buy.. when shares drop this far, you can come in whne the curve turns and enter in a few cents above bottom. dont second guess a bear unless you have the wallet to back your bet. the only problem with theis supposdly sound approach is those clowns who place open bids with no lid price... their brokers get the ten percent price movement rule lifted by exception and sell across the books.you havent seen anything yet.... wait for the school fees arena in january... it will be a massacre...

bankelele said...

Maishinski: even a sip?

MainaT: Maybe this is what the CDSC/NSE needs. Remember what Mwebesa said about too many individual investors, who may be better off using professionals (funds) to access the market?

Ka-investor: More like 2.5%, and you have to factor in dividends.

Coldtusker: KQ may like the $ now, but they won’t gloat about it. I wonder if we’ll ever see 140/= per share again

3N: They have started throwing mud at kercoche by running adverts promoting their own ‘beer quality production processes’

Larry Mads: No one knows,

Maishinski said...

The real bottom is somewhere slightly *above* zero - so we're not yet close to the bottom.

The index can never get down to zero unless all its constituents go bankrupt - highly unlikely.

As long as the company you have invested in looks healthy enough to survive in tough economic times, what's there to worry about?

:-)

Chebet said...

It takes me back to that 'anchoring bias" theory,where you get a point that remains the reference, and base investment choices on that, say if oct last year, as is the case in your comparison.

I know the point is to bring out the changes in share price by such shocking margins, but despite the down swings it can be good for investors to take a step back and view the market from a clean slate...conditions are different now, global slump and ripple effects , so i think it would be worth it to try and look at the market from another angle, without a bias or comparison....what do you think?

bankelele said...

Maishinski: hopefully we won’t find out how low it can go, seems to have turned up today

Chebet: Economist Nouriel Roubini man who’s recently acclaimed for having predicted the 2008 crash, prides himself on never having bought sold or traded a single security in his life – hence his objectivity. I also routinely publish my shares portfolio so I am not accuses of pumping or dumping on a stock. I have done this for a long time, the drawback to October 07 was meant to show that the market dip is not as bad as people expect

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