All about the Nairobi Stock Exchange, USE, DSE, LUSE, GSE, FTSE & KENYA.
(Please see disclaimer at the bottom of the page)
Wednesday, July 20, 2011
Simple guide to NSE's latest IPOs
Firstly an analogy. I tend to compare IPOs to a ball being thrown in a pool of water. Generally, the deep the pool of water, the higher a ball bounces off the water. Assuming it’s a fully pressurized ball.
TC formerly known as G29. This entity inspired me to start an investment group and I believe the harambee spirit embedded in chamas will get us further than we have envisaged. At a listing p/e of 35 you can see why it was introduced despite requiring capital. In contrast, Centum, the other investing firm at the NSE traded a multiple of 10.3. the other downside of TC is a portfolio of underwhelming assets with only EA Cables as the pick stock. Verdict: terribly overpriced.
Britak is a firm I’ve long tried to figure out how to buy pre-IPO shares in, but the IPO is where my interest ended. Normally, insurance firms have very steady income unless there are catastrophic one-off events such as earthquakes or PEV in our case. Britak made losses in 2009, record profits in 2010 and is projecting 62% drop in profitability for 2011. Can Britak do better with your money than it has done with its own? It would like to take circa Ksh0.6bn from you. Verdict: fully priced, there is no meat remaining on the bone.
Finally, in the forthcoming bucket, there is Family Bank’s introduction to the NSE. Many of its shareholders including this senor think this is Family bank’s theme tune “we’ll list this year, we’ll list this year”. We will believe it when we see it. It is said that imitation is the sheerest form of flattery and Family bank has really really flattered Equity. The Japanese copied the US, forgot their prudence and their economy became a zombie, so cautionary tale right there. In commerce, you must chart your own way, though. That won’t happen at Family unless Kiondo is persuaded to retire and either give his son (he of the thin CV), the reins or reduce his attachment to the bank and let corporate governance take root hold without a gun being stuck into his ribs by CBK. Corporate governance would mean a strong CEO shepherded by strong anchor shareholders (maybe Equity?). Facts, facts. Kiondo opened the door in 1984, Munga in 1984. The both target the same market. In 2010, Family's PBT was a 1/20th that of Equity! Verdict: introduction will excite, but do note that it will be the least profitable bank at ze bourse.