Monday, January 14, 2008

Earnings Update

I know neither this govt nor any other has been known for their transparency, but one of the first tasks of a new CMA CEO should be to issue new guidelines on company reporting and relatedly-insider trading. After the credit crunch starting biting last yr, most investment banks and then more conventional banks did an earnings update that confirmed the impact the credit crunch was likely to have on their earnings. This is because it’s a requirement that any material change in earnings must be publicly flagged by all listed companies. Similarly, after a Xmas period that saw weak retail sales, many of the stocks in that sector have done earnings update where their figures will be different from those previously projected.

Post general-election violence and continued nonsensical rallies will affect many sectors. So far only Unilever and CMC have formally announced likely adverse impacts on their earnings. The absence of news from the rest has given way to rumors about the possible adverse impacts within TPS Serena seeing almost 10% shaved off its share price, while others maybe seeing erroneous rises. Some of the falls will be because there is insider knowledge about say the number of bookings that have been cancelled; number of loans defaulting etc.

On the contrary, being transparent about adverse impacts, means investors actually price this in early enough such that the eventual recovery in price will be much earlier than where they until the results are formally announced.


bankelele said...

Serena must be comforted by their 2005 diversification/reorganization to consolidate Kenya with their Tanzania and Uganda operations - that should cushion the 2008 blow

MainaT said...

Banks, according to a research piece by D&B last yr, TPS generate 67% of their business from Kenya.