Wednesday, February 18, 2009

Does this profile fit any firm in Kenya?

Although the article is about some suspect billionaire, I was reading it and trying to fit it into the situations at the NSE:
  • Too good to be true: I.e. doesn't fit the pattern for the economy or sector. This used to be an accusation levelled at the annually doubling Equity, until BBK proved that you could grow your balance sheet at such a rate. From the released results (who does scanning at NSE?), BBK almost certainly understated its loan loss provision. In any case, this is getting harder to get away with at the NSE.
  • It can do what none else can: mmhh
  • Only a few people overseeing everything: All the brokers?
  • Few incentives for whistleblowers: Fits just about any firm at the NSE.

6 comments:

Ssembonge said...

Those who have been swimming naked are being exposed. This tsunami may be God sent.

coldtusker said...

EB's balance sheet has grown much faster than BBK's.

There is a core difference between Stanford IB & Equity. Equity has many more depositors & tapped into a market that was under-served.

All that said, I fear EB's risk will be magnified when the bad debts roll in.

Why?

- Members of the same 'chama' guarantee each other BUT is the risk really diversified?
- A run on EB can be disastrous for Deposit Protection Fund since most accounts are likely below 100,000/-.
- Of the deposits, how much is used as collateral for loans? (Good in that loan losses are minimized but Bad when withdrawals are made)

coldtusker said...

Bottomline: At the moment, I would rather buy a safe 10x PE stock like BBK than a 14x PE stock like EB.

EB's growth will slow as Family & Co-op target the same market.

BTW, I do like EB as an investment but at a lower price say 110/-.

MainaT said...

Ssem-I see you like that WB saying too. Very pertinent for these times we are living in.
Have you ever heard of the Gartman letters and you receive them?

CT-The articlae only alluded to Equity. Pretty much all the listed shares would fall into one or more categories.
Won't touch BBK unless it was under Ksh30.I like trading it on the FTSE though. Very well priced

coldtusker said...

How do I sign up for the Gartman papers?

BTW, I don't know enuff about BB PLC but BBK Kenya has good fundamentals. They are going into technolog7 & have an entire department dedicated to 'change'.

BTW, they may change their banking software in 2009 which means disruptions to business. On the other hand, they are doing it when business is slow(er).

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