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Monday, March 17, 2008

Safaricom sucking the blood of the NSE...???

Well, the prices of most shares are dropping like a rock...

WHY???

Well... as Safaricom's OFS comes closer, other shares are being sold to fund the purchase of SafCon... BTW, Bankelele reckons its better to buy SafCon after the shares start trading...

Let's look at the numbers... 10bn shares @ 5/-. Please note that 3.5bn shares will be sold to 'foreigners' thus reducing the shares available to Kenyans to 6.5bn. I assume the 3.5bn will be picked up by the various foriegn funds & overseas Kenyans.

Ugandans & Tanzanians are considered locals thus we will have over 1mn CDS accounts. The minimum application is 10,000/- (2,000 shares @ 5/-).

6.5bn x 5 = KShs 32.5bn

So all we need are 3.25mn applications for 2,000 shares & the OFS is over-subscribed.

  • There are at least 800,000 CDS accounts = minimum applications for KShs 8bn.
  • Another 200,000 accounts are expected to be opened by E.Africans = minimum applications for KShs 2bn.
  • At least 100 unit trusts, pension funds & other QIIs in Kenya that can buy at least 10,000,000 shares each = minimum KShs 5bn
  • SafCon dealers & employees will get preferential - higher - allocations. I expect a full subscription. an estimated 5% = 500mn shares = KShs 5bn
The above numbers are all on the LOWER end of the range!
  • There must be at least 10,000 Kenyans who can apply for KShs 1mn. Many of these in Nairobi. Add an additional KShs 10bn.
  • There must be 100,000 Kenyans who can apply for Kshs 100,000. Pick your towns like Eldoret, Nakuru, etc. Add an additional KShs 10bn
  • There must be at least 10,000 diasporans (USA, UK, Dubai, S.Africa) who can apply for 100,000/- thus an additional KShs 1bn.
Most banks will finance SafCon's shares. I expect most banks will provide additional financing upto 75% of the application. Not all applicants will borrow but even if 100,000 people borrow 100,000/- it equals to Kshs 10bn.

I am already at KShs 51bn. So... of course, there will be an oversubscription....

It makes sense to temper the purchase/application for SafCon and buy other shares falling in price...

When the refunds come in... there will be a scramble for the other shares. Many investors will repay the loans BUT others will keep the loans. I expect banks e.g. Equity will see an upsurge in their loan books.

So be prepared... not necessarily for SafCon...

3 comments:

Web Doc said...

Interesting analysis about the Safcom ipo.
I'm waiting for those blue chip stocks to hit rock bottom in a month or 2..

Love the blog.

Antony said...

I fully concur that it makes a lot of sense to buy into other falling shares as the IPO date matures i.e. going against the herd. It's also tricky to pick other counters. Any ideas?

coldtusker said...

Webdoc - I don't think there is much more room to fall for most stocks. At some point the institutions will jump in.

Thanks for visiting. Please continue posting comments!

Antony - I will try to address this issue BUT you need to make your own decisions!