Category Archives: NSE share split

10 shilling shares

The recent surge of share splits was unjustified based on the overall trading history of the companies. So it’s only a matter of time before some of these shares dip to their pre-split / hype prices. Any share that was trading for less than 100 shillings in the last 18 months is a candidate for a correction – to the below 10 shillings mark and that includes CMC, ICDCI, and Sasini.

Now that a few IPO’s have passed, but not their euphoria, it is apparent that investment advisors of future IPO’s will have to rework their calculations to satisfy institutional and seasoned retail investors. While government divestment offers will be geared to the mwananchi, smaller private companies will have to ask themselves if by offering IPO shares at about 10/= each, they want to be like Eveready or Scangroup and end up with up with 100,000 shareholders who own 100 – 200 shares each.

Rising shareholder costs
– Kengen told us their 2006 annual general meeting (AGM) – after the IPO would 80 million shillings and another post IPO company Firestone will have their AGM in Nakuru on March 22 (where fewer shareholders can attend).
– With over 175,000 new shareholders, the cost to Eveready of even inviting all their new owners to the AGM is quite prohibitive – mailing out accounts & AGM notices would cost about 4 million shillings ($63,500) [i.e. 175,000 letters X 25 shillings postage per letter]. So Firestone shareholders will also be asked to approve a change in company articles to allow such notices to be sent by e-mail or fax.
– The same postage costs will apply when Eveready mail out their dividend cheques. Since most shareholders have the minimum 100 shares, they will receive payment cheques of Kshs 60. which is hardly justified when you factor in bank & postage charges
– Also to cut costs, the company has sent out slimmed down accounts that are about the size of the president’s speech on Jamhuri day.
– On a positive note, Kengen have made an arrangement with (their bankers) KCB so that shareholders can cash their Kengen dividend cheques at any KCB branch at no cost.

Alternative investments
KTN had a story on Friday about the Central Bank (CBK) crackdown on pyramid schemes – and it was followed by a poll on whether they should be banned. The result was 16% YES, 84% NO (i.e. they should not be banned.) Though unscientific, you sense from the poll that these schemes have become lifelines/shortcuts to riches for a diverse variety of Kenyans.

In fact many of these schemes have been shut down at the urging of commercial banks – who have had to deal with swelling crowds in their banking halls – either depositing or receiving cash in the merry go rounds. Some of these investors blame jealousy from banks (who want to hold their money and give out as loans) and the Nairobi stock exchange for putting pressure on the CBK to act (since they have been selling shares to re-invest in these quick cash back avenues with guaranteed returns.

Bank shares in ’06

Share performance of financial institutions listed at the Nairobi Stock Exchange in 2006.

Share prices as at: Dec 05 Dec 06 Change
Barclays Bank 263 77 (385) 46%
C.F.C Bank 75 89 19%
Diamond Trust 32.25 72.5 125%
Equity (listed in August ’06) 70 139 99%
Housing Finance 13.95 48 244%
I.C.D.C Investments 72.5 325 348%
Jubilee Insurance ]83 323 289%
Kenya Commercial 113 241 113%
National Bank 28.75 58 102%
NIC Bank 51 102 100%
Pan Africa Insurance 40 91.5 129%
Standard Chartered 139 205 47%

Other share activity
– Barclays had a 5-for-1 share split and a bonus issue of 1 for 3 and still paid the highest dividend of about 14 sh. per share in 2006
– Standard Chartered paid a 7.5 sh per share dividend
– Jubilee paid 4.25 sh dividend
– KCB paid a much improved dividend of 4 sh per share
– NIC paid a 2.5 sh dividend
– Equity joined the NSE as the entire shareholding was listed in August 2006 at 70 shillings per share after earlier paying a dividend of 2 sh per share.
– ICDCI shares rocketed up into the stratosphere as the company announced a 10 for 1 share split
– Pan Africa Insurance paid a 1.2 sh dividend
– CFC paid a dividend of 0.84sh per share
– Diamond Trust paid a 0.7sh dividend
– National Bank and Housing Finance had improved earnings but no dividend.

Happenings at the Nairobi Stock Exchange

(1) East Africa Breweries effected a 5 for 1 share split yesterday to make its stock more affordable. It closed yesterday at 114 shillings/share down from 530 the previous day. It is the second company to do a stock split this year – Kenya Oil Corporation (KENOL) did the 1st ever with a 10 for 1 split earlier this year – and its share price has already climbed back to 60 which is the highest price 9equivqlent of 600 shillings – before the split).

(2) In a related matter the Financial Post (a new weekly paper in Nairobi) has an article, which says that 14 companies plan to be listed on the NSE once their over the counter (OTC) market is operational. Companies will only have to display two years of profits unlike the NSE where you have to show five years – or they also don’t have to show good profit industry, only the potential to turn round! Companies lined up include Kenya Cooperative Creameries and Cooperative Bank, Timsales, Hutchins Biemer and Orion – an agro chemical company.

This OTC market will target the cooperative movement. Just the fact that a company cannot meet the listing requirement for the NSE, make these much riskier investment vehicles – especially for the cooperative sector which is riddled with mismanaged giant societies. I think small investors can participate in the NSE-proper as the KQ AGM showed. Its stock trades for 19 shillings, and there are several other companies that trade for below 50 shillings.