Thursday, May 29, 2008

Safaricom: My Post IPO Strategy

Can be summarized in one word. Buy. Nothing else will do given I have a 3 yr strategy on the stock.

In the short-term, the counter's price will be pushed downwards and pulled upwards by broadly similar factors.

Loans: With something like 30% of the Ksh191bn having been financed by loans, guys will be wanting to offload ASAP so they can minimise interest charge. Some will also hold out for gains so that they can break-even against the loan, its interest and associated charges.

Subscription: Because of the oversubscription, I'd say retail investors will get hammered and will be lucky to get over 23%. Of the remaining 70% from above, I'd say 20% will sell because these are miserable number of shares to get. The rest will jump in for more.

Refunds: I expect this to be a protracted process not unlike KenGen. The application volumes and the fact that the brokers don't learn, means guys can expect refunds to still be coming in a yr's time. Thus this may mean they sell to get some cash so they can cope with inflation.

Results: Although the 2007/8 results were slightly below expectations by around a Ksh1bn at PBT level, this was still a good performance that will ensure guys will jump into the stock that on a P/E basis of 14, is undervalued by NSE standards.

My strategy is driven by one simple thing, despite the fact that Safaricom is a 15-20% per yr growth company, it'll do an AccessKenya i.e. whatever happens in the short-term (next 3 months), it will be at around Ksh15 in a yr's time. Any price below Ksh7.50 will see me jumping in. Beyond this price, it'll just depend on how my growth stocks are doing.

1 comment:

Ssembonge said...

At 20% allocation I expect there to be a scamble when it opens up for trading.

You can forget fundamentals for now until demand is met. Buyers will outnumber sellers.