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Wednesday, October 18, 2006

ICDCIC announces a 10:1 split... and great results

On 19 Oct, the next trading day after the announcement, ICDCIC shares traded between 420/- & 800/- for an average price of 553/-.
I am speechless! Well, good luck to the buyers!

Share splits (not banana splits) are all the rage!

Kenol started it off with a 10:1
EABL followed with a 1:5 bonus followed by a 5:1 split
E.A.Cables did a 10:1 split
Now, ICDCIC announces a 10:1 split!

ICDCIC closed at 391/- on 18 Oct 2006...
EPS: 11.03 (+106%)
Div: 4/- (+33%)
NAV: 112/- (+23%)

The AGM is on 12 Jan 2007 (which is quite late considering the year end was June 30 2006) & the split shares start trading on 22 Jan 2007.

Price on 1 Jan 2006 was 72.50 thus the price has increased by 450%, while profits 106% & NAV only 23%.... The "real" NAV is probably higher since they have some great investments whose value does not fully "show" up on the Balance Sheet.

Bottomline:
The NAV is probably higher than shown since some assets are shown at "cost" or "directors' valuation" that could be conservative. Included among these unlisted investments are shares in Eveready & General Motors (K) among many others.

ICDCIC did not provide a breakdown of the income from sales of shares. These gains may be one-time gains if ICDCIC cannot replace the "sold" shares with other investments that will attract similar gains/returns in future years.

ICDCIC has indicated a Rights Issue was possible to raise funds. The split will "reduce" the price to "manageable" levels for many investors.

Since it remains an investment firm, the premium to the NAV is (IMHO) too high unless the unlisted firms' are valued at much higher prices/multiples.
Nevertheless, I expect the price to rise on a SPECULATIVE basis.

IMHO there is little value/upside at current prices even though the firm is expected to do well in 2006-7.

8 comments:

mushenzi said...

Since the split will be effected more than 2 months after the announcement, the share may encounter serious fluctuations taking into account other activities lined up at the bourse such as Govt divestiture. If the govt sells any of its parastatal shares b4 then, i bet the price for ICDCi shares will have to drop (b4-split) as people dispose to buy new investments. To me the timing of the announcement was far tooo early...

kenyanentrepreneur said...

what on earth are you guys talking about?

Anonymous said...

kenyaenterpreneur. please ask a question

gathinga said...

again, a share overpriced by sentiments as opposed to solid fundamentals. I heard the md announce that a provision had been made for the loan of kshs. 40m still owed to icdci by uchumi. only to see they have provided 9m. Its time kenyan ceo's are held accoutable by reporters!

kenyanentrepreneur said...
This comment has been removed by a blog administrator.
kenyanentrepreneur said...

I will begin with this quote:
"all knowable information about a stock's value is already reflected in its share price, you can't predict them at all".

gathinga:
I remember mentioning once on bankelele's blog that you couldn't take what ceo's said at AGM meetings or wherever and believe it was all true!

Kenyan business reporting has a long way to go. It was a reporter at fortune magazine, who had previously worked at an investment bank that first discovered enron's shenanigans. She went over, line by line, the public financial statements that the company had filed with the SEC.

Now, I know all the people here will come back screaming about how enron is just one company & they are many others that are doing fine. That is not why I keep highlighting Enron. I could cite several other companies, but it would take up too much space.

The point is, unless you know the ceo personally or until the securities laws in Kenya are updated and backed up with an independent judiciary or another independent investigatory body, you would be a fool to rely on the public statements of these CEO's or other MD's of government run parastatals.

Now, even in America, a country that has an independent judiciary, strong securities laws and a vibrant and knowledgable business press, cheating still occurs. A lot of people have lost millions of dollars by relying on this kind of 2nd hand information.

The only people who are going to get rich from the NSE are the brokerage firms. They get their commissions regardless of whether or not you win or lose.

ok - I'll wait for all the screamers to start howling.

Kudrinketh said...

KE
Why are you setting yourself up? your're becoming too easy a target so i'll pass.

This ICDCIC stuff is getting crazy,who's that fool who bought at sh.800? do these people even understand what a split is.these fools think that a split creates value? i think these companies are taking advantage of ignorant investors by announcing splits so that they can offload to bigger fools.CMA should do something to save these foolish speculators from their greedy selves.

coldtusker said...

Mushenzi - I agree but for someone with cajones & who can read the psychology of these "investors" can really milk the market!

ke - Look up "Share Splits" in Wikipedia.

gathinga - It's the SHAREHOLDERS who need to question these items. I get pissed off when some shareholders only care & clamor for food & freebies!

kudri - Fools & their money are soon parted. Sell & relax while the prices fall or stagnate! Wacha Buyers...watalia!