Safaricom’s IPO: Do You Care?
I guess there’s going to be an annoucement tomorrow by Kimunya on the modalities of this IPO. The investment banks who get this business are going to be smiling all the way to Tahiti when they start adding up their humongous fee’s from this transaction (These brokers are making a killing). If this article is correct, the big one’s brought in about $6 million dollars in fee’s last year alone!). That is very, very, good money for a supposedly “poor” country like Kenya. Is that correct? According to the article, the average amount was about 400 million kenyan shillings, per firm. Wow!
It seems to me like the only people getting rich off these IPO’s are the large investors and the brokers. However, I want to hear from two groups of people here:
It’s an very well run company. I mean, $250 million dollars in pure profit? that’s better than many American companies.
Okay. Over to you.
I think the whole idea of selling off Kenyan parastatals to indigeneous Kenyans is a good. This is one of the ways that you can guarantee security in the future i.e. when citizens feel that they have a stake in their own country. If the country is wholly owned by foreign entities, there is always the threat that there will be violence.
Having said that, the LSE needs to mobilise ordinary Kenyans in the rural areas to buy shares during the IPOs and also participate in the stock exchange in general. And I mean in real rural places such as Githunguri, Bondo, Matuu, Kabartonjo, Mumias, Wajir, Mwatate, Mazeras, Lodwar etc etc etc.
Kenyans need to become more sophisticated in their investment options. They will then stop fighting each other in medieval style with bows and arrows over scraps of land.
Kenyans need to realise that they can invest in the New York Stock Exchange even though they are based in their villages.
The question is, who will educate Kenyans that the world is bigger than their village???
I said recently on this blog that I am now going to invest in Gold, Diamonds and other high value commodities and look at the price of Gold today!
Its certainly better than a plot in Eldoret…….
[...] allocator wrote an interesting post today onHere’s a quick excerptI guess there’s going to be an annoucement tomorrow by Kimunya on the modalities of this IPO. The investment banks who get this business are going to be smiling all the way to Tahiti when they start adding up their humongous fee’s from … [...]
To an extent, I agree that it’s the brokers making a killing at the NSE. Look at it this way, the moment you make an order, be it sale or buy the broker gets the commission whether you make a profit or not on the order. I find it absurd that a broker earned over $6 million dollars when NSE was rated as the second worst performer in African stock markets. Actually, NSE posted a negative return last year.
Even as the Capital market authority grapples with the issue of errant brokers, another area they have clearly underperformed is public sensitization on what stock investing is all about. Retail investors are approaching this exercise as if its investing in a pyramid scheme. And many are getting burned.
My daily task involve consultation on investments i.e Unit Trusts and Stocks and generally, personal financial planning and mostly people come to me when they have burned their fingers. Moreover, these ones are resilient. Many keep away from stock investing after making huge losses.
CMA needs to educate the general investors. Otherwise, Safaricom IPO will excite the market but only for a while.
Courtesy http://www.conceptadvisoryservices.co.ke
KE;
here’s my experience as a nairobi based ‘investor’
Kengen IPO- this was the best for almost everyone. (at least 3 times investment or 300%). the huge volume of shares on offer mixed in with the euphoria and a skewed allocation process (for once skewed in the small guys favor) meant that it was a hit all-round.
Scangroup was similar to kengen, only on a smaller scale, restricted by over-subscription. returns about 200%.
Eveready- a disaster of sorts, as the prices rose from 9/- to around 17/- and then sunk to 8/-. the tiny allocations made it a real waste.
KenyaRe; the allocation process meant the bigboys were guaranteed a slice from the start, and it showed. the stock has hovered at 15/- ever since, not far from the ipo price.
please note the short-term nature of these ‘investments’, typical of most non-institutional players. for a longer term outlook (which could be vastly different), try bankelele or coldtusker!
the broker experience is appalling- from a lack of tables (yes, office furniture) during IPOs, to illegal buying&selling of shares (i was once leveraged 50% on an order i.e they doubled my purchase.) and simpl callousness. hope this lot gets sorted out sooner rather than later.
i’ll try not to mention that discount securities are the broker in question here. though they’ve upped their game of late (new offices, more staff), a level of mistrust remains. to go round these games, get an INDIVIDUAL within the brokerage to look out for your account.
Josh
i concurr on the gold investments. i gave up the ‘plot’ ideas long ago. the question is, who offers such services in Nairobi? or should i resort to keeping my gold as jewelry (somali and indian-style) ?
Yes I’m excited about the IPO, howver I expect to continue my recent trenmd and also advise others to Bypass/sit-out the IPO calendar and wait till the shares actualy list – and then buy Safaricom in the secondary market.
Every stock market has a “buyer beware” sign on it and the NSE should be no exception.
Have participated in several IPOs successfully. I also trade regularly (been doing so since 2002). Its been a great success and will continue like that for at least another 5-10yrs. For comparison, I’ve also trade in the London Stock Exchange and the annual gains tend to be around 10% of what i get at the NSE.
The Nairobi Stock exchange is a great place to invest if youre there for the Long term, not on speculation.Ive traded there before and havent lost yet. The thing is one should do some reading from good investors to have an idea of what happens in the stock exchange. Since i know it will be oversubscribed, and it might be the only deal for the year, ill buy other companies and just enough of safaricom. Other companies will rise faster than safaricom after the deal is done. In NSE the main gains are capital gains not dividends. So look where capital gains can make your investments grow. There are Crook brokerage companies, but we need to make money. You occasionally have to take charge of your wealth by monitoring your account frequently. Crooks will always be here, theres also the story of the Rogue trader in America, but we need to0 make money though!
This Safaricom IPO will definitely be big for everyone, I mean after announcing their impressive results, everyone will want a piece of that.
However, has the best for safcom passed us? In the next few months two new competitors will join the market, i.e. Econet and Telkom Kenya/Orange, both of whom are experienced wireless operators. This will definitely have an effect on the pricing of service which should favor the customer, unless these guys engage in oligopolistic tendancies.
I’ve always maintained that kenyan cell phone providers charge at the premium for their services, but I can’t hate on that, it’s business after all.
As for the kenyan brokers, I think they really need to step up their game. The whole investment sector in kenya needs to be upgraded. Hopefully with more kenyans returning from the west and gaining good expereince and joining these firms, then we may see improvements. I think there’s a seriuos level of un-proffessionalism in those kenyan brokers and no wonder they steal people’s shares and money by illegally trading with them.
Also to blame is the CMA, which in the past behaved like atoothless bulldog. I see they have new managemnet in place who will hopefully do their job. Previuosly, they had this clown called Ntalami or somethng, total looser and coward, not to mention incompetent. I mean, this guy had a brokerage firm that had been suspended at the NSE, and then the guy becomes the big dog at CMA??? total non-sense.
Jimnah Mbaru: fine, this guy has the respect and credentials for what he does. BUT…( a big BUT)……Is there no such thing as conflict of interest in kenya ? This guy is the chairman of one of the largest brokerages/investment banks that do business on the NSE, and yet he’s the chairman of the NSE. It’s like the CEO of Morgan stanley or Goldman also being in charge of the NYSE…??
If you’re to trade on the NSE or buy shares, I’d recommend you do your own research and use the broker to execute your trade, don’t listen to those red jacket clowns who don’t know squat but to trade your stocks without permission.
by the way
JOSH & LEOEDD, Ilike that idea of investing in other assets like gold and NOT dwelling on Land , especially in places like Eldie
Very good comments everyone and thank you very much for them, but I have another question for you (particularly if you are based in kenya).
For a Kenyan in the diaspora who’d like to start buying shares on NSE listed companies, how would you recommend they go about doing that? *Any brokers you’d recommend?
*Also, how long does it take to execute an order? I was reading this
Kenyan blog where some guy said it only took his broker 3 days for them to finally sell some of his shares and he was quite happy with that “quick” turnaround. what!
Josh:
Have you looked at the price of wheat futures?? they’ve almost tripled (I guess the supply of wheat around the world isn’t keeping up with the demand).
KE,
The best returns have been in the things we least expect. Commodities have been doing good and dud things like pork bellies and even orange concentrate…???
I guess it’s all about supply V demand.But for the foresable future, I don’t see gas oline easing. I mean, a barrel is at $ 107 now?!
how do people survive then in kenya with these types of prices ?
MZEIYA-
Gas prices are all politically manipulated by the giant oil corporations.A barrel can fetch $20 and still they can post profits coz its so cheap to produce oil,its the exploration that requires deep pockets.of course they keep it that way to fed off competition.You wanna learn how cheap oil can be, read Venezuela. I heard Kenya govt. is tired of oil games and thus entered into a deal with Chavez to supply Kenya with cheap oil through NOCK (govt. own gas stations.) Hopefully this will lower our Kenyan prices.
If Bush just says “Iran is a threat to the world”…..you know the barrel will jump to $120.Or If say Iran fishermen after a good catch shoot in the air over the straight of Hormuz, the barrel will hit $200.
@bankelele
Please expand on why you insist on sitting out on safaricom until after IPO? Am also being told that this thing will not go beyond 10bucks after 12months, due to Telkom and econet eating away on their profits, unless they do something else to keep them ahead of the game.
Btw, looking at the money transfer angle this guys might end up being the future central bank due to the amount of money that will be held in their network from credo!!(credit and wire transfers) so they might just evolve into something else who knows.
I will buy and hold position; long-term, also spread your wealth: other stocks will be going down to furnish investors with capital to purchase safaricom, when that happens buy them up and sit back.
Furthermore, after the announcement: it looks like there is something sticking in the market, I expect it to be downhill from now on until the first week of trading safaricom in the NSE.
Piece of advice: Avoid Jua-kali brokers and you might have a good night sleep, try the majors.
Good Luck, BUT AM NOT QUALIFIED TO GIVE ADVICE ON STOCKS.
Mzeya:
Do you trade commodity futures?
I don’t know about safaricom either, but about 8 months ago I was talking to this guy and he told me that Bear Stearns, the big investment bank was going down and wouldn’t you know? this week it happened
He also said Citibank is next. Can you believe tha? He said they have too much debt and not enough cash on hand! I expect they’ll bail citibank out because if it collapses, the effects on the u.s. economy will be disastrous, but his essential argument is that the U.S. economy is headed for a major recession. All you guys in middle management be careful – major layoffs are coming.
if big banks like citi and bear can go down, no one’s money is safe. It’ s all these investment banks taking on huge debts and then trying to predict what will happen in the future and when that doesn’t happen they end up in big, big trouble.
@ke
if i was u i would stay away from commodity trading. u have to make some big investments to make any good money..investing in kenya is a whole different ball game. unlike overseas markets in kenya u can easly triple your money in the first week an IPO is floated..but after that,its all up and down like a roller coaster if not worse. u have to worry about ua broker like nyaga stock brokers going down with all ua money….good luck tho.
The best way to play safaricom is simple…..TRADE IT, then INVEST!
This is what I mean..get in with the IPO, as soon as it lands on NSE it will at least double(or quadriple) because of institutional buying.
That’s the time to take your profits..every one who entered for that very same reason will be getting out. After that you can now follow bankelele’s advice…go for it now: it has cooled down , this time for the long term!
Always :Buy low, sell high
KE
I haven’t checked out the wheat futures but I have a bit of a low down on the wheat situation. Experts have it that China, India and Africa are driving wheat prices up. This is because the people have become more prosperous and are eating more wheat products e.g. pasta, bread, spaghetti etc. So really, the only way for wheat is up! By the way, the same is happening with milk, meat and soya. This is something I will look into.
As for Safaricom, I will definitely get in with the IPO. I will invest in several thousand shares and not over expose myself. I don’t know what is going to happen in 3 years time when the Optic Fibre cable is operational. People might resort to using VOIP on a massive scale and bring down the profits in normal telecoms. But yes, I am in there. I want a share of Safaricom.
MZEIYA
I am also looking into Carbon Credits but the market is currently going down due to the anticipated recession. We have to become more sophisticated in our investment options. I can still lead a very good life without owning a plot in Eldie.
Having said that, my position is that IDPs should now be resettled as soon as possible.
@mzeiya
what are carbon credits???
Good stuff all around. Got into gold in mid 06 when I began hearing of subprime issues to come.I agree with those who say buy the Ipo, sell then purchase shares again for the long term when the pricing settles down.
Kiumane:
Why do people think commodity trading is any more risky than any other kind of trading? with the internet now, you can execute your buy and sell order almost instantaneously (& of course, i’ll be using stops).
Josh:
How long does it take to execute a buy or sell order with any one of those Kenyan brokers, especially if you are based abroad?
It is more risky because if you’ll be trading derivatives. If forget to close your contract before expiration, the farmer will happily dump trucks of cattle or corn in your back yard.
Dont play with with FIRE..
KE,
the regulatory framework of our capital market leaves a lot to be desired. However we can only stick with it as we demand for stricter scrutiny by CMA. We need to open up the stock exchange to more companies by opening up middle level bourses.
Grrrr!!
can Kimunya, being the astute professional he is, move fast on this issue? Because if there is anything thats going to open up our economy its the capital markets.
KE
It should take approximately 3 – 4 days if you already have a CDS account. If you do not have a CDS account, then this could take longer because of the logistics of opening one when you are abroad.
This is very slow and it obviously shows how pathetic the Kenyan IT infrastruture is. These are the areas the new PM and the rest of the government should concentrate on. They basically have so much work to do that they should not waste even one minute bickering.
Kenya is basically in the dark ages as far as IT is concerned and this needs to be addressed urgently.
I also totally agree that the CMA needs to have more teeth and the regulatory system should be simplified. This would create confidence in the markets.
I am planning to use a fledgling Kenyan agent based in the UK for the Safaricom IPO. I can do it directly in Kenya but I feel I have a duty to buy through a Kenyan just to give him business.
Razor:
That is a good point – I gotta pay attention to those contract dates. I’m also trying to figure the cost per bushel and all that other nonsense.
But did you see Bear Strearns stocks after JP morgan bought them? It was trading at $86 dollars and now it’s a $30 dollars and those guys didn’t have time to sell it because the deal took place after the markets had closed!
proudkaleo;
a carbon credit is a certified absence of carbon emissions (CO2, Methane etc) . if i can reduce the amount of (say carbondioxide) gas, produced by my country or company below a set quota, i get credits for the reduction. the credits are then sold in the markets to those who have SURPASSED their own quotas.
this is basically selling air, and it is dependent on international agreements, treaties & protocals to create demand & supply. i’m not sure it can be called ’safe’ or ‘investment’
(on a side note, dont they teach this at the warrior school?
Josh;
you mention carbon credits: one way of earning some of your very own credits is buying/renting a plot in eldie and planting trees on it. so dont hate to much on the plot!
Just what?
You made me laugh there. I was just joking about the Eldie plot. But seriously though, it is a scary thought that hordes armed with bows and arrows can burn down your property and actually hack you to death because of an election. Property that you have actually fairly and freely bought on the open market – presumably with constitutional guarantees. That is scary.
As for carbon credits, I remember talking with Eddy Njoroge (MD – KenGen) about a year ago and he is the one who advised me to look into it. I think KenGen is into this market. I have recently looked into it and there is actually money to be made. The best way may be to buy into new carbon credit trading companies. The market is predicted to explode in the next few years. This is because the big polluters will not suddenly stop producing CO2. What they do is to allocate big quotas to poor countries that do not have capacity to pollute. They then buy back these quotas!
The best time to sell a cow is when its pregnant and the udder is in its fullest. The government is thus selling safaricom at its prime time. The profit it is making may not continue for the next say 3-4 years. The crowd wants to buy it, but ill buy and sell if the price is more than say 15-20 bracket. Ill then have made my money and buy other shares. After trhe excitement the prices usually cool off, for example kengen and Kenya Re. Then one can but back the shares at a much lowe price and wait for some other peak. The Government knows that other operators atre coming in soon. So the best time to make money is NOW. Retail investors have a habbit of selling off many of tehir shares after the prices rise to make a killing. The prices therefore go down because of high supply of the shares in the market.
there are however otrher strategies to help one survive. When everyone is focusing on Safaricom, buy it and other shares. Since im sure that there will be an oversubscription, this excess money will later find its way to the stock exchange. There will be demand of ther shares other than safaricom and their prices will start rising. The heat will therefore move from safaricom to other companies whose fundamentals are sawa.
Some of my bets are kenya Re, Kenya Commercial Bank, Equity bank. One of them could be a jackpot. So i buy all.
My knowledge in stocks can be critiqued,but ive not lost for a long time. I sold my Kengen at 45, and smiled all the way. Ill be buying safaricom through many people to get the most allocation, and not though many CDS accounts in the same name which might not work ghis time as i hear from good sources. Theve computerised the shares application process if you have a CDS account which uses your ID number or passport number. This as a key field may be used to remove multiple applications from the same person.All in all, ive had fun in my 5 years experience in the exchange.
Josh;
the carbon credits are definitely better than commodities. how did kengen’s mr.njoroge propose you go about the carbon market investment?
kengen has credits worth about 1billion Shs from the olkaria geothermal plants, but what can i as an individual or smaller corporate do?
on a side note, why wouldn’t dyer&blair or some of the other brokers tap into this market and work as traders? they have no lack of friends (e.g. eddy njoroge) in the parastatals, plus it’ll be an honest days work, without hordes of ‘common’ wananchi to wear out their carpets.
Wow,
this is my kind of post..real talk…
KE:
No I do not trade futures, I’ve just been doing some reading about them and how they’ve had a run and will continue to do so. There’s a guy called Jim Rogers, he’s a commodity investor and has written several books and articles about investing and commodities. He’s a staright talker, tells it as it is and I like him. you can google the guy and learn more about him. He strated the quantum hedge fund with George soros a while back.
PROUD KALEO:
Just what explained the carbon credits
KIUKAME & ALL:
Yes, please avoid jua kali brokers.
There’s definitely mad money to be made in the safcom IPO. The share price at 5 bob is a very deliberately undervalued price.Leoedd is right about the gava startegy. This is the best time to float safaricom coz I doubt if their profit margins will be sustainable.
In the future I’d rather buy and hold Telkom Kenya once it’s listed in 3 years. reason is, they are a communications company with diversified sources of revenues. Safaricom just do mobile communications and they’ve been very successful coz The old telkom kenya was sleeping on it’s job.
But with Telkom now having an internet, landline and wireless startegy, this will definitely have a downward effect on safaricom’s pricing.
There are currently arround 300,000 land lines in kenya and I think there’s huge market to up those numbers, and internet too.
KE: Yeah , Bear sterns is now no more, they sold at $2.00 a piece.scary indeed, and now the fed has cut the interest rates further…wow, I didn’t know the effect of this subprime mess would be to this scale.
About Citi clsoing shop..wow, I dunno, that sounds far fetched, but maybe bear sterns sounded far fetched a couple of months ago. But think about CITI and how big and how it’s virtually intergrated into the world economy. If there’s a real chance of citi going down, I highly suspect the gava will bail them out, just as they bailed out Long Term Capital around 20 years back.
I still think that apart from safaricom, the gava should also list Kenya Ports, and Kenya Airports Authority…
[...] Kenyanentrepreneur wonders whether people care about the IPO: Having said that, the LSE needs to mobilise ordinary Kenyans in the rural areas to buy shares during the IPOs and also participate in the stock exchange in general. And I mean in real rural places such as Githunguri, Bondo, Matuu, Kabartonjo, Mumias, Wajir, Mwatate, Mazeras, Lodwar etc etc etc. [...]
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I’m a first time investor from Europe. I am interested in buying a small stake in Safaricom. Would you advise it? Because the stake I am interesting in buying would be small (about $3000 max), I am more interested in short-term increase in share prices. Should I go for it?
Thank you,
Luke
Here’s my opinion about SAfaricom IPO. Don’t buy! There’s no money to be made at all. Not right away. Here’s the reason why: Every retail investor in Kenya today is buying it for one reason; to cash-in on 1st day of trading. No one is there for long-term, unless you’re institutional investor. So the trick is with everyone thinking this way, there’ll be the issue of Demand and supply, and this might drop the price down in a BIG way when the stock is listed at the NSE.
A few will make some cash. But most will not. Don’t you recall what happened with Kengen after day 3 of trading? Where is it now?
So if you’re a smart investor, while the average kenyan focuses on SAfaricom, you focus on buying those stocks that are stable and are now hitting rock-bottom as investors liquidate to buy safaricom. Buy the banks, buy the cement, then sit on them and wait. You’ll be glad you did. You can then buy safaricom when it’s readily available at Shs 1.50 after a few months. And trust that is when the institutional investors will come in and the stock will get stable.
No stock ever does well when the bulk investors is retail.
Safaricom isn’t going anywhere when 90% of its ownership is Mama Kamau, Odhis and Mwende:)
Oh! the big excitement that murred both the literate and the illiterate kenyan population is no more. Kenyans can perhaps come back to the purpetual reality after their active senses were swindled in the play and win game in the Safaricom IPO. We have for a long time been desparate we small scale investors over what can be termed as the “capital Market assymetry”. However, if a good samariatan from the IPO process was to elaborate further what scope of rationality was going to be used in the share allocation would perhaps ignite a reservation of refuge of what could be the ultimate risk in the allocation process. Elsewhere, we would in solidarity blame and disregard any dogmatic phobia of incompetence within the capital market brokers. What is this stuff of corporate irresponsibility affecting our kenyan brokers? We thought that the NSE whas operating under candid rules and regulations of the internationally accepted accounting standards. Then why this meyhem of collapsing securities firms. Suppose we chose to strictly adhere to the Securities and Exchange Commission standards that have kept American exchange organizations such as the London Stock Exchange, NASDAQ and the others moving? Lets watch as we keep self motivation for the success of our capital market.