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Wednesday, October 29, 2008

NSE going to the dogs?

Wow... what carnage!

(All said and done I think many shares are a steal if you have a backbone of steel)

KCB at 16.85 which is a 2x PB and less than 8 PER.

Equity Bank has not seen 114/- for almost 2 years. The price is even LOWER than it was at the height of the violence in 1Q 2008.

Warren Buffett would have a blast in the market & buy up a lot of stuff. I think it might sense for some firms to go private at this point!!!

There is little LBO cash but the possibility of buying out minorities... and then taking the firm private is so tempting. Hey, Unilever Tea (Brooke Bond) did just that!

Look at KQ (29/-) which is trading at a substantial discount to NAV. If they were allowed to buy-back shares, they had KES 12,000,000,000 in cash (2Q 2008 - 31 March 2008), and could buy back 200,000,000 shares at 30/- (KES 6,000,000,000). Suddenly, you have eliminated 40% of the shares thus allowing the remaining shareholders to earn substantially more on their investments!

KCB is at 16.85 & can generate over 13% on the shares based on current earnings. A buy-back would allow an increase in ROE without the need to take on additional risk. Just raise Tier 2 capital when the capital markets improve.

And the list goes on. Finally, ABSA could make a bid for Barclays Kenya. It was too pricey earlier but at 43/-, the price is rather attractive.

If I were Vodafone, I would buy 11% of the shares that gives me effective control of Safaricom so I can consolidate their results. And I can buy them at a rock-bottom price of Kes 3.50!

Equity Bank is in a position to make a takeover bid for HFCK. Offer 20/- & the minority shareholders of HFCK will make a beeline to sell the shares!

Safaricom should make a all-cash (20/-) bid for Access Kenya & in one swoop could own Kenya's largest ISP for corporates as well as the most extensive wi-max network in Kenya. I expect almost everyone except the Somens might be running to sell their shares! Heck, maybe even the Somens!

The cash rich firms e.g. KQ, Safaricom, Equity Bank can do wonders if they deployed the cash they have!

EABL is also cash rich but who would they buy that is complementary to their existing business?

CFC-Stanbic should look at buying out NIC Bank. Or perhaps even NBK now that NBK bad debts are manageable.

How about Equity Bank swooping in for HFCK as mentioned above. Or KCB buying out HFCK in its entirety & roll-up S&L into it?

I do not know if Centum is cash-rich after the recent happenings... but it could buy out 1 or 2 listed firms... if they have the cash!

Of course, we have Williamson Tea & Kapchorua... why do they list as different firms? A combination would be ideal at this stage!

5 comments:

ka-investor said...

...and Tanscentury can now buy all the stake they want in major firms like KQ and Accesskenya. or they could simply take over some small firms like Express Kenya.

ruthleen said...

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MainaT said...

We are going lower, but it'll be worth the wait.

coldtusker said...

ka-investor: Only if u have chumz/cash.

ruthleen: Welcome but is this merely a ploy for traffic?

maina: Timing? Buy value not timing! BTW... BH/WB did not buy GS at $115.

Constantine said...

About the big profits bank being reported by our banks. I rememember just last year American banks were reporting record profits, now they are fighting to survive.

Western banks profits were financed by credit, when credit ran out they got into trouble. Our banks profits on the other hand are financed by deposits, I can't wait to see what will happen to Equity Bank when deposits start to nose dive???

Haven't you seen how our banks have stopped pushing loans and started rewarding customers for savings??? How many adverts have you seen on newspapers advertising fixed deposit accounts?? That pay peanuts.

I believe in business cycles, economies, markets and industries go up and down. In a recession the worst affected are those in the informal sector. This is the market that has built the foundation of Equity Bank.