Reading the Precision Air Tea Leaves

Precision Air (now a PLC with a 126-page prospectus at their site) was incorporated as an LLC in 1991. It flies to all major towns in Tanzania Mwanza, Tabora, Musoma, Shinyanga, Kigoma, Kilimanjaro, Zanzibar, Mtwara, Arusha and Dar es Salaam) and internationally to Kenya, Uganda, South Africa, and Comoros. Kenya Airways (KQ) became a strategic investor in 2003, acquiring a 49% stake.

Air Industry: There are 27 air operators in the country, and Precision Air is the second national carrier of Tanzania with a 59% market share, followed by Coastal Travel 14%, others with 21% and Air Tanzania with 6% (via TAA stats). It is also the only Tanzania carrier operating scheduled international flights and member of the IATA clearing house (ouch!)

Tanzania is a large country with a service industry that contributes 43% to GDP of the country, and id that has increasing air industry opportunities thanks to mining, tourism, but challenges include a lack of staff. Precision has been a local pioneer in e-ticketing (which cost $1 compared to $10 for paper ones), frequent flyer programs and online check-in.

On Offer: Unlike past cross-border listing like Bralirwa (Rwanda), Stanbic (Uganda) and Safaricom & Britak (Kenya) which have been available to nationals of all East African countries, the Precision Air IPO has only Tanzanian and non-Tanzanian categories for retail and corporate investors (no East African category). 51% of the shares are reserved for Tanzania nationals in the case of an over-subscription, Tanzanians can’t buy on behalf of non-Tanzanians, and 3% of the shares are reserved for staff of the airline.

If dividends are paid, they are taxed at 5% for both Tanzanians and Non-Tanzanians (shareholders of unlisted companies are charged 10%). Historically, they have paid dividend of about Kshs. 7 million and shareholders equity tumbled in 2011 thanks to a hedging reserve hit of Kshs. 615 million.

58 million new shares are on sale at a price of ~Kshs 29 (TzS 475 each), with a minimum application amount of 200 shares, then multiples of 100 thereafter. The offer runs from 7th to 28th October with results announced on November 11 and listing at th