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Monday, March 31, 2008

SafariCON IPO - Very Interesting


GUEST POST by Anonymous

Just got a call from my friends telling me about the on-going great Safaricom IPO. The Safaricom IPO is running from March 28th to April 26th with 10 billion shares for sale.

Wow. Did someone say 10 billion shares? So if it is true that Safaricom will be selling 25% of it's shares then Safaricom has in total of about 40 billion shares. I know that those figures are wrong. GM the biggest company in the USA has a market cap of 11.5 billion. Safaricom has a market cap of 40 billion. I might be seeing double. If I am wrong please correct me. That was enough to make me interested in this IPO.

1. Buy Safaricom on Monday sell it on Monday

That is the story I have been told that most Kenyans are telling me that they will do. That is not investing. That is what we call gambling. As we all know the house always wins with gamblers.

The first rule in investing in anything is. If you won't own a business for 10 years, don't even think about owning it for 10 minutes. So my friends and family are already disqualified from buying this stocks.They have no intention of even looking at the books of this company.More than a third of the people buying this shares have no intention of keeping it past Tuesday.So why not wait until the real investors are in the company instead of a bunch of gamblers?

2. Why is Safaricom selling?

If the company is so profitable, why have they been trying to get rid of it for so long? They say the Kenyan government is trying to offload Safaricom shares. If you believe the Kenyan government is an angel that really cares about Kenyans, then think again. These are the questions I asked myself:
  1. Who exactly is the government. Is it ODM or PNU or both?
  2. Is there another party in this so called government we do not know about? We all know some people will have kickbacks etc in the so called government.
  3. The first time I heard about this issue, it was vodafone that was selling 6% of it's holding, what changed?

4. Why was ODM against it, before he became for it? Did they just find Jesus when Raila was made PM?
The first rule of in making money in an IPO is that if the main reason to sell is to give venture capitalists their money back, you have a 70% chance of losing. Safaricom does not want to sell shares to buy the latest technology etc, they want us to pay some other entity money. That is not very smart investing.

3. Safaricom numbers don't add up

If it don't fit ,you must acquit. So said Johnny Cochran. In my case the numbers are just mind boggling for this IPO. There are going to be 10 billion shares at ksh 5. So for a one month period, the Kenyan stockbrokers will have 50 billion in their coffers. At say 2% broker commission, the kenyan stockbrokers will have over 1 billion in their accounts. If there any stock brokers in the Kenyan stock exchange, buy them instead. Here is where it becomes interesting. Some people are expecting those shares to do to 10ksh on day 2. So technically ,the Kenyan market will have 100 billion ksh in a period of 2 days to invest in Safaricom. Do you really believe that? The Kenyan GDP in 2007 was 58 billion. Did someone say over subscription, I will say bubble.

4. Safaricom Growth

I have been told that Safaricom revenues will continue to grow. Maybe, but that is the real reason that someone somewhere is selling. Growth of over 50% in any company in consecutive years just spells bubble.

No company on this earth leave alone an economy can grow at those levels unless someone is cooking the books or it's a totally different product that no one has ever seen. It could also be a monopoly, but I heard that more cell phone providers are about to be licensed and the Internet cable is coming soon. Safaricom can not and will not be able to sustain such growth. So the next time you see their balance sheet, you will note that their level of growth has started to drop.

5. Company Management

If you want to make money in any IPO, the management team is very important. I hear that the current GM is leaving soon. Why? Who is taking his place? And who are these Safaricom management team?

I called my so called Kenyan Broker and he could not even tell me who the directors of this company are and the top management team including their company secretary. If my own broker does not know who runs this company and how long the team will be there, why should I put my money in such.

Maybe I got the wrong broker. I might just be negative about Kenyan business in general but the numbers for this IPO, are just too hard for me to swallow that they are kosher.

I will try and get the Safaricom books and comb their accounts. I haven't done P/E's, EPS, and their debt ratios. However, I am not buying it, you should do that on your own.

Crazy confessions of what a campus lady student did under the seats at Kenya Cinema

33 comments:

Anonymous said...

It is point 4. that interest me. I wrote sometime back that Safaricom may just be hitting a plateau before its fortunes starts to decline. The simple reason is that Kenyans are about 35 million of which it is estimated about 10 million already own mobile phones. That is a significant ratio of 3.5 persons per phone. I guess this is very close to figures for industrialised world. Secondly, the composition of the population has a significant number of children who cannot afford mobile phones or whose parents may not allow them to use the devices because of long term health concerns that has refused to go away. If someone can put a good argument against these issues, then it may convince others that from a purely business point of view, the IPO is worth investing in. Otherwise, I personally remain very sceptical.

Anonymous said...

Phil, Umenipoteza kabisa


Ivy

Anonymous said...

Phil

I strongly agree with you though I am not an economist-just by using some common sense.

When I invested in AccessKenya IPO, the need to raise money for growth was clear. Am not so sure about the KenyaRe IPO's reason besides the need for the government to raise funds (How much more do they need? from my payslip I know they are raising too much already). Both IPOs were oversubscribed and I was especially disappointed from the allocation of shares following the KenyaRE IPO. I vowed NEVER to invest in a NSE IPO again.

This SafariCON one will not tempt me for the same reasons you have highlighted. Its not an investment, it's a gamble very similar to the Mumias Sugar secondary IPO.

Is the GM really leaving?? And which government is this supporting it?? Even with Raila's statement the other day, I am not convinced ODM fully supports this IPO. With the 3rd provider and the right politics and technology (allowing retention of original numbers), switching costs may not be too high for Kenyans.

Safaricom just enjoyed the first mover advantage. It better watch out there is Celtel and other competitors including disillusioned investors that will willing to switch at whatever cost!

antonio said...

For once i agree with Phil.
I invest and i will continue investing but safcom is just not passing my gut-feeling test.
Maybe i am so wrong but as of now my gut says there is more to this than meets the eye.
I know someone who bought 1 million shares with an eye to capital gain i.e fisrt day order to broker to sell at 10bob. Now if you have the same stockbroker and you have 2,000 shares when will yours ever be sold?
Investment is personal and i do not care about what ODM or PNU say..my twocents...something doesn't feel right!

Kimi Raikkonen said...

First of all, selling your shares is not gambling but speculation, which is perfectly normal practice in stock trading.
Secondly, you cant sell your shares until trading officially commences in June.
Also,40 billion shares @ 5/= Kenya shillings(100 billion) is not the same as 11.5 billion GM shares at 18.67us$/share, the price as at March 28, or 214 billion US$ OR Kshs.12.9 TRILLION! Kind of puts matters into perspective, doesn't it?
It simply demonstrates how Kenya is still a toddler in the bush, in spite of the pompous pretensions to the contrary by our dunderhead politicians and their cohorts.
Those people pretending that they want to boycott the share issue because of Mobitelea should boycott Safaricom altogether and stop buying airtime. You can't pick and choose if you are indeed truly principled, otherwise cease the hypocrisy.
You can't go to Celtel either as when Kencell sold out, the same Mobitelea guys(we all know who they are) who had shares there too are still very much around. They never went away.

Anonymous said...

The annonymous author wrote
"I know that those figures are wrong. GM the biggest company in the USA has a market cap of 11.5 billion. Safaricom has a market cap of 40 billion."

I dont understand what he is actually talking about here? Does he mean market capitalisation, number of shares or dollar value of shares in case of GM versus kenya shillings in case of Safaricom.

He also needs to check his figures on kenya GDP as he said it was 58Billion in 2007 whereas Kimunyas budget was over Kshs 600 billion

OT said...

if 25% of Safaricom is 10 billion shares. then mobitelea with their 5% stake are the proud holders of some 2 billion shares. if they sell these even at 1 shilling per share, they will be 2 billion shillings richer considering they paid air for these shares.

Anonymous said...

really believe that? The Kenyan GDP in 2007 was 58 billion??????

A point of correction.Kenyan GDP according to CBK annual report was 1,244,447,000,000 in 2007 that translates to around US$19.75 billion.

Government is offloading shares because it is raising funds to offset the budget deficit coz it was included in the last budget.

Anonymous said...

Safaricom's growth might decline but MPESA is one of the services that's gonna bring good bucks to it leave alone safaricom was the first mobile provider in the world to offer such a service.

Dear Kenyans,
We need to support our local industries.Safaricom is you and me unlike Celtel that is owned by Merali and Kuwatians.
Let's be proud of our country and promote our poor citizens by buying kenyan products.

Anonymous said...

Sam Okello has published a new book called 'The Mau-Mau Prophecy' in which he claims to know who has been named to succeed the Kenyatta-legacy. Did anybody here read this yet because it would save a lot of time and effort to find out who is the saviour of Kenya - according to Sam Okello. Since he has presented himself here already before as the 'prophet' on Kenyan politics, I am sure also this time he will be able to lead us into a better future in accordance with his own schemes.
I hope, you don 't dispappoint me - Sam Okello.
Since you have proclaimed yourself to he a presidential aspirant for the 2012 Elections, come out and show us your true colours and don't hide behind some 'fictious' names.

Anonymous said...

No doubt the safaricom shares will be oversubscribed but there are many stakeholders benefiting unfairly here. Especially by holding innocent investors cash and trading with it for at least a month.

Gambling and speculation what's the major the difference? Yeh right! will the government eventually sell itself dry to pay for the budgetary deficiencies incurred by the blotted MP salaries among other expenses?

The reason why anyone should sell their cash cow still eludes me here? Can someone please explain or has the government foreseen a fall in the safaricom profitability?

For this reason am out!
I am waiting to do a postmortem on this issue in 3 months time and pat myself on the back for not speculating, sorry gambling.

Does the Gava not have any shares in Celtel then?

Anonymous said...

Another angle to look at this SafCon IPO is an opportunity to launder money bigtime in the name of "foreign investors"

Anonymous said...

I think there is no transparency,no accountability what so ever in Kenyan Businesses all what we need right now, and this is my idea we should have entities like Dunn And Bradstreet to establish offices in kenya so that we will have the root in stemming out companies.The way how companies operate in places like Europe and America and as far as Asia,they are all listed and people know who the CEOs,what earning they make interms of GDP.

Thanx.

Anonymous said...

The administrator of this blog should not publish articles of low quality as this one... a good article should be written from a point of knowledge and should be well researched.. e.g. how can this 'writer' reveal such great contradictions on NO OF SHARES and MARKET CAPITALISATION????? every writer whose articles are for public consumption should make some effort and inform themselves first rather than reveal such level of ignorance on a topic that requires specialised knowledge???

Anonymous said...

Anon @ 5:03,
What irony!! You say we should be proud to invest in Kenyan companies and yet you don't tell us who the Kenyans in Mobitelea are. Secondly, why are you not telling Kimunya to reduce the 35% allocated to FOREIGNERS to say 1% so that the Kenyans you are talking about can buy the "Kenyan-owned Safaricon." You think it is Kenyan just because it has the word "Safari" in it? What then is the citizenship of Michael Joseph? I'd rather give a foreigner (read Celtel) my money who gives me good service and value for money than a fellow Kenyan who steals from me and gives me substandard service. I agree with those who say Safaricon has now passed its peak. It will never make a 17million profit again. It will start rolling downwards and a rolling stone gathers no moss.
If Kimunya is re-appointed Finance Minister then even Telkom will go down the drain....plus many other parastatals that will show that they can make good profits.

Anonymous said...

Just out of curiosity, is Mr. Nicholas Nganga - Chairman of Safaricom, the father of Fidel Castro Odinga's wife Virginiah Wanjiru Nganga? if so, could that explain Railas last minute turn on the IPO?

Susan

Taabu said...

@Kimi Raikkonen nice game of SEMANTICS albeit poor delivery. Besides spelling and pronounciation gambling and speculation amounts to the same thing which qucik fix riches bereft of sweat. Red heering and hair splitting is better left to the classrom and elevating the fantacy to politics and leadership is to play Russian roullette with Kenyans. Nonethless I hear you in your determination to kupiga debe that is fidelity albeit of the reverse order.

Anonymous said...

Just to get some point straight, market capitalization is a measurement of corporate size equal to the share price multiplied by the number of outstanding shares of a public company. Second Exxon Mobil is the world’s largest company in terms of market capitalization. Now am not an economist but I surely do understand the law of supply and demand and how it affects the price. Most of the “investors” buying the Safaricom shares are hoping for a windfall based on previous IPOs such as Kengen. The problem is most of these people are not investors but rather speculators hoping to make a quick buck through “Share Trading”. After the initial IPO there will be an excess of Safcom shares based on the numbers and the price will surely stagnate around the initial 5 shillings if not lower (law of supply and demand).

Amkeni Ndugu Zetu! said...

Sensational reading, interesting argument, but the figures fail you, Phil. I won't take up much of your time, so I'll just point you in the right direction: The Kenyan GDP in 2007 was 58 billion? Is that in shillings or USD? Either way, the figure is wrong. Kenya's recorded GDP for 2006 was $22.79 billion (http://www.state.gov/r/pa/ei/bgn/2962.htm). Not that I'm for this IPO anyway, but I feel that with such high-hung arguments, you have to get the facts staright, or your argument loses credibility.

SolutionObjects said...

Why does kumekucha let some people torture us with there stupidity? Who wrote this article? Please tell your employer to fire you. I'll tell you something people, Mobitelia in no way benefits from this IPO because Vodafone Kenya cannot sell there shares at the market, the only shares being traded here are the 25% the government is selling, so the only way mobitelia profits is from the airtime you buy everyday stupid!And safaricom is not about to stop it's growth momentum, by the way, for the last 9 months only, they made almost 16 billion so I predict that this year, profits will be in the range of 20 billion. Another thing expansion is not pegged on customer base in kenya only, don't you think that safaricom wants to do business outside kenya? the resent partnerships with mobile providers in the region is just a start, to test the waters in those countries, watch this space. so my dear kenyans, don't let people with pedestrian understanding of commerce dissuade you from making a sound investment, mobitelia not withstanding, we can still pressure the goverment to investigate mobitelia even after the IPO, and those who are saying that mobitelia are the same people at celtel, it's public knowledge that celtel Kenya is owned 60% by Zain group and 40% by sameer group, so are you saying that Merali is Mobitelia? Check your facts dude, buy Kenya Build Kenya.
I won't even comment on the article, it's way below my IQ

Anonymous said...

Susan - 8.03 - your guess is correct. Explains all, doesn't it?

Anonymous said...

Guys wake up the shares are up for grab. But???One has to be extra vigilant because I have just read somewhere that AT&T this is the largest telecommunication company in the world,It wants to invest 1Billion US to explore foreign markets.Just an advice, the shares will for sure worth nothing in 2 years if AT&T will decide to explore Kenyan market.So kenyans be extra careful before one decides to invest his hard earned shillings.

tnk said...

susan 8:03

interesting.

as for this IPO issue by now a lot of arguments for and against have been put forward,

is there any more reason to continue flogging a dead horse?

sorry to digress

Chris, why dont you send out a team or make a converted effort to take a more in-depth look and get back some real stories on the number of IDP camps and the real happenings behind the scenes going on including those that have been taken back to "ancestral land"

I think these people are slowly being forgotten and yet are facing tremendous challenges. Kindly highlight their plight and the efforts in place with contacts of help groups so that some of us and maybe these IPO investors can also chip in and help out there where we can.

Try to also unearth scams that are also in place over there as unscrupulous people hijack opportunities for self gain, and any violation of human rights.

use your good forum to reach out and lend a helping hand to these kenyans.

Anonymous said...

SolutionObjects said...

Why does kumekucha let some people torture us with there stupidity? Who wrote this article?

what a stupid argument- if I own a corporation with sister companies or different branches under it?? let say a register different companies to handle different investments and sale shares in this companies like most business in the world work? you want to tell me that the mother corporation will not make money or benefit? from it's other compines or vs other sister companies will not benefit from the business from the mother company??? do not be naive!!Mobitelea with it sales it's share or not! it will make money!!

Anonymous said...

tnk said...

susan 8:03

Do you have relatives running a scum at safaricom that you want kenyans to stop discussing it!! do not tell Kenyans what to do or what to discuss on Kumekucha !!we are all aware of the displaced people -some of us have relatives who passed through there!!
but if there is another anglo leasing in the ipo rush sales Kenyans have a right to keep discussing it until the truth is none!!
who is mobitelea
why were share put aside for Transcentury aka equity bank aka- British and American government??
you get my drift???my thoughts are the Kenyan government borrowed big from equity and they can't service the loan- go check who owns equity??
I doubt whether Raila or Kibaki had a choice in the matter!!our economy was going burst!! the lenders wanted their money and government had no money to pay down on the loan!! Raila even if he wanted to say NO - could not let the government sink!!
go check this facts out!!

Anonymous said...

@Taabu, while I agree with you as to the similarities between gambling and speculation, Kimi Raikkonen makes some valid arguments on the 40billion of safaricom being of little relevance to the 11.5 GM shares. The post not only fails in comparing apples and oranges but it assumes that one kilo of steel (GM shares) is heavier than a kilo of feathers (Safaricom shares). The author further dents his/her credibility by pulling figures – Ksh58B GDP, from thin air. Couple this with lack of or sheer ignorance in acknowledging about Safaricom’s senior management employment contracts and one can only reach one conclusion of the post, it is Voodoo finance at its finest! And no I wouldn’t buy Safaricom but for totally different reasons most of which are more social than economic.

Anonymous said...

Ngugu Zetu .. invest in Safaricom. Look at Kenya Airways. At some point it sold for kshs 7. Despite all the international Airlines competing with it, Its still our pride, and has wonderful returns on Investment. As for Safaricom, the future is unlimited, its a technology driven company, very innovative, the population is increasing. AT&T is a dinosar and can't compete in Africa or emerging mrkets.

Anonymous said...

Kenya is a failed state being run by foreign looters.Period.

These foreigners know more about the republic of kenya than those headless, delusional elites who are now dreaming that hey have some power to share.

If a country is incapable running garbage collection or water distribution for it citizens in Nairobi, the capital, why would anybody think they can run anything else?

Kenya if going to be re-colonized once the US AFRICOM if fully operational.

AGAIN, KENYA IS A FAILED STATE RUN BY FOREIGNERS!!!!!

Anonymous said...

Anon 10:26 ..Precisely, i guess some people should just check their IQs to see if they are above, below or at par. Ama niaje?

Ivy

Kimi Raikkonen said...

Taabu, where do you get the idea that the Safaricom IPO is gambling? Based on what facts? By claiming it is a gamble, you are by implication saying that it is a risky and hazardous venture to buy the shares. Where is the proof? You are just being spiteful and alarmist. Safaricom is a proven profitable company and that is not about to change unless you are from Pluto.
You and others who think like you are just looking to hurt Kibaki, his Govt and his supporters out of sheer malice and you will pick up and throw anything and everything at them to help you achieve that goal. Nothing else matters. The reasoning is that if you(the ODM reactionary wing) can't have the Govt, then Kibaki and his supporters will not be allowed to eat or sleep. All this bitter hatred will eat you up alive and you will all end up a bunch of cantankerous, difficult, bad tempered, noisy, toothless, lonely and horny old men who own nothing.
Solution Objects, you are correct that Sameer owns 40% of Celtel. However, Sameer is actually a company whose owners are Naushad Merali and one D.T arap Moi. Moi and Biwott are the owners of Mobitelea. Lets not beat about the Bush.
If all the anti-Safaricom IPO talking heads really want to hurt Safaricom, they should STOP BUYING AIRTIME! That is how they can, by extension, hurt Mobitelea. Also, don't bother going to Celtel, Mobitelea people through Sameer are also shareholders. They can also stop buying Celtel Airtime and stick to Telcom landlines, that will be a real statement of intent. Otherwise, they should take a flying leap or chew their nails out.

Anonymous said...

Kimi..T
his is a fact "Even Giants fall"- Check out history books for evidence loads of it. Safaricom is a Giant today about tomorrow we are yet to see... to gamble or not to gamble?

Anonymous said...

Phil,
its 2.29AM for christ sake! get some sleep. maybe when you are all rested...then you may be able to give us a convincing theory.(you are such a story teller)
Let me guess, you are actually going to buy this safcom shares!, all you are trying to do is discourage as many people as possible so that your chances of gettin ...... you know the rest of it!! and you are somehow getting somewhere. pls let Kenyan be. (why do you care anyway). I loathe you kind of breed which can't tell a single truth! Damn.

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