Category Archives: Co-op

Co-Op IPO Aftermath

A formal statement is out today after Monday’s press conference where the bank’s management revealed that through their 2008 IPO, Co-op Bank had raised Kshs. 5.4 billion (~$77 million) but short of a revised target of Kshs 6.7 billion as 66,576 shareholders bought 546 million shares. The Business Dailyreports the shares will be allocated 60% to individual investors (340.5 million shares) , 30% to institutions (171 m shares ) and staff will get 9% (52.6 m shares)

Capital raising: the offer was not underwritten (by D&B winner – best lead transaction advisor and best investment bank), but despite the shortfall, what was raised should be enough for a few years. Co-op’s capital adequacy goes from 9% to about 18%, which is not bad [10 billion would have taken to this to 22%]

Other banks that have been reported to have engaged in recent private capital raising include K-Rep and Southern Credit while others who may need to tap shareholders next year could Chase, CBA, CFC Stanbic and even KCB (for the third time in five years?)

Glass Half Full: Though Co-op had initially set out to raise Kshs 10 billion, their listing came at a tough time and was not received as enthusiastically as past IPO’s. Still it had some positives but came in a tough market before the target was revised down, but has some positives

– For the bank: 66,000 shareholders is a manageable register , and since they did a lot of the placement and receiving work in house, the IPO was not as costly as others (budgeted at Kshs. 248 million)
– For new shareholders: no refunds to queue for, and for once a 100% allocation
– For other serious investors, a brief return to sanity as the IPO speculators with their borrowed funds kept away – Co-op was the fall guy that injected some reality back into IPO process and share investments.

2009 IPO’s: Next year could see the entry of Nakumatt supermarkets, bread maker a DPL and others from the private sector.

From the public sector (Government side) comes a series of planned privatizations a few of which could be IPO candidates to assist the Government in fund-raising:

Top of my my wish list is Kenya Pipeline, whose much improved governance saw a consortium of banks line up this month to offer the company funds for expansion (a few years ago KPC was using dubious financial intermediaries) and Kenya Wine Agencies. In addition, more shares of Kengen East African Portland Cement Company and National Bank will be sold to the public.

Other non-IPO candidates will be targeted at strategic partners [for Kenya Ports Authority- and TEAMS (submarine cable)] while private investors may be sought to invest in the sugar companies [Chemelil, Sony, Nzoia, Miwani, Muhoroni] hotels of Kenya Tourism Development Corporation, banks [Consolidated Bank, Development Bank of Kenya] and food processors [Kenya Meat Commission, New Kenya Co-operative Creameries]

Kutwa Tuesday: Sam’s Kids


They may be called Barack, Michelle, Obama, or other creative names, but many of these new kids born and given fabulous American
baby Obama names were conceived as a result of Uncle Sam’s bungled election debacle in December 2007.

Opportunities

Airbus University Challenge: the Airbus
Fly Your Ideas challenge is open to university students around the world with ideas on the future of aviation and improving its environmental position. Prizes are €30,000 and deadline is 1st December 2008

Georgetown Fellowships Apply for the Georgetown University Law Center’s Global Health Law Fellowship Program. D/L is February 16 2009

Kenya Content Conference Tandaa 08 a local content conference sponsored by the Kenya ICT Board takes place on November 14 2008.

Kenya’s Top Women The Business Daily invites you to nominate Kenya’s Top 40 women under 40. send their names, contracts and reasons why they are worthy (in less than 500 words) to top40under40@nation.co.ke by 30th November

Government of Kenya jobs:
– Judiciary 25 resident magistrates. D/L 21/11
– Electoral commission of Kenya – 39 district election coordinators

Biz brief’s

Co-Op IPO: is 1/3 of the way to target with just 3 days to go optimistic about the Co-Op IPO. transaction advisers have now released cash flow and share price projections that should have been in the Co-Op Prospectus. what happens if they fall short – will D&B pay C-op for the shortfall? Is there a last minute investor who will get preferential terms to bridge the gap? The prospectus states that in the event that this minimum amount is not attained, approval may be sought from the Authority to proceed with the listing of the existing shares and any Offer Shares that are subscribed under the Offer.

I got an SMS (as did other Co-op customers) inviting me to take part, but the application desks/tents still look rather forlorn

Equity – HF: November 4 was not just Obama day, but also the date when the Housing Finance and Equity Bank deals should have been completed

Foreign Investors Tough times for the former Rift Valley Railways and Tiomin who continue to flounder: Tiomin’s latest statement notes. …. the Government of Kenya has not completed the remaining bureaucratic steps required for the transaction to close…..Tiomin’s management shares our investors’ extreme frustration at this unreasonable delay….. Tiomin has acted in good faith and we are very disappointed….. If the closing continues to be delayed, we will consider terminating the MOU on the grounds of unreasonable delay….. Tiomin will issue another press release when further material information is available. Pity they have no local defenders

Geothermal prospects : two companies are scoping in Eburu (gilgil) and Menengai for geothermal energy

Brew turf Coca Cola launch minute maid juices in Kenya (what happens to 5 alive) as EABL launch Alvaro in Uganda

Sat-TV: DSTV will launch pre-paid scratch cards, following in the footsteps of rival GTV who are reaping from the ongoing English premier league

Insurance by M-Pesa: Madison Insurance now accepting insurance installment payments by M-Pesa following Old Mutual, which enabled investment, plan payments

Radio Standard Group prematurely possible radio investment worth Kshs 250 million as KISS FM parent Radio Africa rolls out their 4th radio station – XFM (rock music)

Share Portfolio November 2008

Last review in August 2008

The Stable
Diamond Trust ↓
KCB ↓
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↓

Review
Best performer: Scangroup -8%
Worst performer Stanbic – 36%, Safaricom -28%
In: none
Out: none
Changes: None – Market down this last three months, no trades made (and no commission generated for stocbroker).
Performance: Down 12% in the last three months while the NSE Index is down 16%
Looking forward to: Possibly picking up some Kenya Airways, Kengen, and Safaricom if their shares continue to get cheaper, but sitting out the Co-Op IPO.

Co-Operative Bank Listing A to Z

Almost halfway through the IPO window which runs from October 30 to November 13 2008 at Kshs. 9.50 each. Minimum application amount is 1,000 for retail investors who will get 66% of the floated 701.3 million shares

Basis for listing funds raised will go toward new banking system, new branches, mortgage finance business, card business etc.

Cost of listing The budgeted cost is Kshs. 249 million ($3.1 million) and includes Placement fees 99m Advertising 68m, CMA fees 20m, Printing 17.5m, Lead Sponsoring Stockbrokers fees 8.4m, Public Relations 8.3m, Co-sponsoring Stockbrokers Fees 5.2m, Lead Transaction Adviser 5m, Legal Fees 5m, Receiving Bank fees 3m NSE listing 1.5m and valuation fees of 0.9m. This compares to Equity listing – 28m, Access Kenya 40m, Kenya Re 280m, Kengen IPO 401m, KCB rights 1.1 billion, and the giant Safaricom IPO at 1.1 billion shillings

Expert advice: See also Nairobist and Ratio perspectives on the Co-Op IPO

Float Retail investors will get 463 million shares and qualified Institutions will get 210 million shares, with employees another 28 million shares. The cooperative societies, which will own 62% of the company, are locked in for 5 years, but the existing individual shareholders are free to sell their (680 million) shares.

National Bank of Kenya a joint-receiving Bank for the IPO and the only bank to step forward and offer 100% loans towards the Co-op Bank IPO. Consolidated Bank has just announced that it is also financing.

Numbers Projected EPS is Kshs. 0.66 for 2008 from a profit of 3.45 billion ($43 million), and estimated assets of 87.6 billion [deposits of 66 billion and loans of 51 billion]. the bank has about 800,000 customers, 50,000 CDS accounts, 53 branches and 152ATM’s

Shareholders top shareholders comprise some of the largest savings and credit societies and also top management of the bank. These include Harambee SACCO 3.7%, Teleposta Sacco 2.97%, Afya SACCO 2.94%, Masaku Teachers SACCO 2.90%, Kipsigis Teachers SACCO 2.46% Kenya Police SACCO 2.33%, Gideon Maina Muriuki 2.32 (the Bank MD), Kiambu Unity Finance Co-operative Union Limited 2.27, Nandi Teachers SACCO 1.78%, Aembu FCS Limited 1.77% Mungania Tea Growers SACCO 1.57%. The top 10 individuals are all senior managers and board members (4%)with about 51,000 other shareholders, but there’s no lock-up period for their shares. Equity listed with 2,800 shareholders

Recapitalize a Subsidiary – Co-op consultancy services (-17m reserves) which builds capacity among SACCO’s is also one of the goals from the listing

Subscription: mid week, little traffic and activity among brokers and at various IPO tents around town. Subdued but significant marketing is taking place. Adverts in the newspapers (even the Weekly Citizen tabloid) and on TV

Timing of Listing IPO euphoria for shares has dampened somewhat since the Safaricom IPO and the downward trend of the market right up to the start of the Co-OP IPO

Transaction advisersLead advisers – PKF added to Dyer & Blair, National Bank added as a receiving bank

Valuation beyond setting the basis for the offer price at 9.50, there’s no comparison to peer banks of this size (KCB, Barclays, Equity) which would be expected.

Verdict slight over-subscription expected. barring Safaricom, past IPO’s generally appreciate after listing long enough for speculators to cash out. The shares are much less than the 10 billion from safariom, but having 1 billion shares floating in the market with a large retail pool will have the shares behave like Mumias Sugar shares [Kenya re 9.50 august 2007 for 240m shares]
Me? bypass for two reasons (i) IPO bypass theory resumes even though a lot of the negatives associated with IPO’s – queues, refunds, hassles seem to be are absent (ii) my portfolio is overweight on financial shares.

Safaricom 2s

Three weeks after Safaricom’s share price dipped into the 3 shilling range, the share is on the verge of tumbling into the 2/’s [$0.025] – down from the IPO of 5/= and brief high of 8/=.

What are others saying?

Coldtusker points to some deals that can be cut cheaply with NSE shares.

KCIG states that a bear market should be no big deal for serious investors.

Analysts are still producing reports on NSE shares to buy (Access Kenya). What about when to sell?

Everyone’s doing it, so throw more stones at D&B – Dyer & Bair who structured the Safaricom IPO.

Shut down the NSE?: Closing the shares market to salvage what’s left was proposed in Nigeria and now a stockskenya thread has taken it up here as well.

Could be worse: Liquid Trader gives insights on the SA economy that are not easy to decipher by watching CNBC.

Another IPO you say? Co-Op Bank opens tomorrow. No prospectus out yet, but here’s another PDF from the Bank MD.

Looking for work? here’s a great new local Kenya job blog.