Thursday, October 30, 2008

Co-op Bank IPO: Update

IPO application process kicks off today and closes in a fortnight's time i.e. 13th November. Listing is on 22nd of December. There is no dvp for retail investors.

prospectus can be found here. Browsing through it, I couldn't help but note that Co-op is just another bank perhaps in the mould of NBK. The young CEO has done a good job so far, but the future is probably going to mean more of the same. The capital raising IPO will fund:

  • IT: New core banking system that will hopefully reduce cost income ratio

  • Branch expansion

  • Mortgage financing: This is capital intensive business

  • Re-capitalising its investment arm

  • Connecting Saccos-I've always wondered why Co-op doesn't concentrate on creating its own banking network with the Saccos

  • Visa card franchise

  • Regional expansion: Idea has legs but others are already ahead

    Bottomline: Ask yourself the following two questions:

  1. Is it the cheapest banking shares (half yr comparison is attached) on a forward P/E (not just 2008, but 2009, 2010 etc) plus dividend yield basis? Don't forget to add in 2% selling fee...

  2. Can you, if you want/need to, exit above ksh9.70 (break-even point)?

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