Equity or Uchumi?

Uchumi
Bad timing for Uchumi whose private placement to raise 300 million shillings from shareholders draws to a close on August 15, which is when we are making investment decisions about Equity Bank shares.

The minimum investment of 10,000 shillings, approximately equals my loss, and I have to say no thanks this time – I am not going to put another 10,000 into Uchumi. It’s too soon to come back begging, the company’s status is unclear, and there are too many investment options out there.

Shareholders who take part will be on par with the government’s rescue loan but rank behind after banks and suppliers. And we know how poor parastatals are at repaying government loans. Also, there are many investigations pending, and no one has yet come out and clearly reported why the 1.2 billion shillings raised 9 months ago was not enough or where it was spent.

Yes, I will shop at Uchumi as much as I can, but that’s the extent of my support this time.

Equity
With the August 7 listing of Equity Bank shares just a week away, one of the company’s prominent directors has resigned from the Board.

We have to take note of what directors do in a company and it remains to be seen why a director at Equity made this decision so late in the game. We all remember how ICDCI duped the public they were not taking part in the Uchumi rights issue, as a way to reduce their stake in the company when all along they planned, and did sell out of the company completely soon after.

Got Milk
It’s a good time for milk drinkers as prices have dropped and all the major dairies have positioned salespeople at supermarkets to hawk their milk. Many of them are selling 500ml packs at 20/= (down from 25/= a few months ago) and also give away a free 200ml pack as well. The oversupply of milk is likely to reduce prices paid to farmers – a situation that no one wants, and so milk companies are giving away their surplus for free.

Bio-diesel
Nice feature on KTN/Standard over the weekend about efforts to produce bio-diesel in Kenya. Kenyatta University is pioneering a scheme in which 200 farmers in Kitui, Bondo, and Rachuonyo are cultivating jatropha curcas which takes 2 months to grow and can be used to produce diesel, which should reduce the country’s fuel bill.

25 thoughts on “Equity or Uchumi?

  1. Kudrinketh

    hey banks,who is the equity director who just resigned.this sure does raise some eyebrows, makes one wonder what else is going on. i’d hold off buying until the market determines the true share value, could take bout 6 months.thanx for the good work banks.

  2. Kibet

    I think, like Nalo(PS) said, if a certain number of shareholders don’t stand up and raise the 300m (or whatever balance) needed, Uchumi’s revival may be compromised and shareholders will now be faced with the reality of losing entire value of their shares!

    Current shareholders, in my view, and if they have some loose cash, shld invest in Uchumi to safeguard the sums already committed in the stock that is currently not trading.

  3. dropmyload

    Has anyone else seen the letter from “concerned staff” at Equity bank to the CBK Governor? It points out a lot of issues hiding under the surface at the bank, and I think it might not be prudent at this stage to invest in the bank. Issues relating to shareholding, suspense accounts, loan appraisals, audits etc are all raised, and having seen all these issues hurt banks before, I think it would be prudent to investigate before investing.

  4. bankelele

    Rista: You’re welcome

    Apexquest: I agree. I will shop there as much as I can and if that’s not good enough, too bad.

    Kudrinketh: matter should be public by now. I agree it will take a few months for the price to settle as more shareholders immobilize their shares

    Kibet: Sorry, but Uchumi was a major bite out of my small portfolio and it’s not prudent for me to throw any more money at them (except as a shopper)

    dropmyload: do share the letter please

  5. gathinga

    banks
    this Uchumi saga might be more complicated than we think. Suppliers were promised payment of 25% of their dues within 1 week of re-opening and another 25% within a month. 3 weeks down the line, the info is that most suppliers have not been paid…ati the payments will have to be audited by two auditors. and then… the 2nd payment will be due in a week… so u can see the accumulation. It raises issues as to whether govt actually deliverd on the 650m loan or there are still issues being negotiated

  6. Anonymous

    I don’t think I will help out Uchumi as well, coz the value of my few shares is not even equivalent to the 10k they are proposing.

    then, quick question, is it true that ScanAd has already done its share allocation???

  7. coldtusker

    Even though it is early (just 3 days since the IPO closed) does anybody have news on Scangroup?

    The consensus is that its probably oversubscribed but by how much?

    I think they want to avoid a KenGen like fiasco/confusion so they will probably make sure & announce the allocation on Aug 21 per their published schedule. Of course the runours will be swirling ahead of time!

    Trading starts Aug 29 2006 BUT the Equity listing will overshadow Scangroup.

  8. mwasjd

    Got milk, well remember there was drought a couple months ago. How things change. Thank God for help, cheap milk, KBS cheap fares, saidias the mwananchi in these tight times.

    Would definately be interested in the Equity scoop about the resigned director and letter to CBK.

  9. patti

    The culture of negative thinking should end. We have come to put all our faith in experienced people with a track record that we forgot that talented managers need a chance to prove their worth.
    A new CEO will want to prove that they have what it takes to take a company to new heights.
    We have proven in the recent past that we have people with talent to turn around the fortunes of companies.
    What record did James Mwangi before he took over Equity, which was as good as gone? Mugo Kibati before East African Cables. Mapelu before East African Portland Cement, Evans Kidero before Mumias Sugar?
    We must come to appreciate local talent.
    Only Kenyans understand Kenya and can come up with home grown ideas.
    KCB made a loss of 4 billion in 2003 but recovered. We must start having faith in our companies and support them the best way we can. The idea of raising money from shareholders is to ensure that they feel that they are part of the process as were suppliers, bankers, landlords and government who also sacrificed for the greater good. They too had options. Equity investors were patient enough and they saw the company through thick and thin. Today they have seen their number of share grow 20 times due to bonus shares and they receive good dividends. The shares have been trading at Ksh 100 over the counter due to demand. As true investors we must begin to realize that in business you need nerves of steel. Shares should be seen as long-term investments not quick Kengen style gains

  10. Kudrinketh

    @patti, doing your due dilligence has nothing to do with patriotism, if we all did that then we’d have a hell lotsa uchumis. i’m not about to loose money just to support some “local” talent who would not hesitate to swindle me of my hard-earned money. i look at the fundamentals first,then the trend in the stock market and i could care less if the comany is run by people from planet Mars, so long as they deliver.

    This “ours” mentality is why tribalism will never end in Kenya,meanwhile “our” leaders will continue to swindle us of billions and not share a dime with you.Just look at Goldenberg, nuf said!

  11. annex

    @Banks & others – what do you think of EA Cables.. So much price movement. Is this for real or just boardroom tactics by interested. I think a share split is in the offing…no companycan sustain kes 330 in Kenya for now. Still searching to see their business strategies

  12. bankelele

    gathinga: I need to hook up with some Uchumi suppliers for more info. Suppliers have been PAYING 10,000 each to register/secure their interests (lawyer &other movement expenses)

    Coldtusker: oversubscribed slightly I believe (less than 20%) – they should fit in timetable

    Mwasjd: Compare the price of milk, water and petrol

    Kudrinketh & patti: Agreed – I will support Uchumi by shopping, but not more investment, even if Naikuni or Shah returned to manage it

    Annex: EA Cables has definete insider moves. As for share split, EABL and Kenol both passed 600 before they did theirs.

  13. Kenyan-Intel

    Bio fuel is a big thing .recently PBS did a story on brazil and how it changed its dependance on oil fuels to sugarcane based eco fuels. at first it was expensive to implement but with high fuel prices brazil is reaping the benefits

  14. coldtusker

    @banks – If Titus Naikuni or Suresh Shah were to become CEO of Uchumi (& given full control), there are Banks (I mean the real banks!) & Mutual Funds who would trip over themselves to lend to Uchumi!

    Its about TRUSTWORTHY Management!

    SG – 20% only. That’s lower than I expected BUT works better for applicants who will get what they applied for! I speculate most of the “over” came from retail investors since the “corporates” would be cautious after KenGen thus only applying for what they could realistically get.

  15. JabaBoeku

    Allow me to contribute to this topic,albeit late.
    Equity might be hounded by some managerial practises that are not ‘common’ to other banks but i think their growth is smthing to reckon with.

    Chances are given the euphoric-driven nature of our market, the share will/might possibly do good.

    Which of the Director resigned? Is it a Director, really?

    Its all but a question of time, i guess.

    Uchumi has had the best of my cash and I will not be willing to put any more cash to chase that one…I’ll gladly and patriotically shop there but thats it!!!

  16. Anonymous

    Well, Equity is in a quagmire. As per new CMA rules and the listing agreement, James Mwangi cannot continue as MD because he holds more than 5% of the company, and he cannot sell for two years. I haven’t heard of any resignations yet.

  17. coldtusker

    SG oversubcribed by 400% thus most will get teeny allocation esp if u applied for over 10,000!

    84,000 application! Even at 1,000 shares each = 84,000,000 shares while they only had 69,000,000 to sell!

    I think it will hit 15/-!

  18. Anonymous

    Very smart for ScanGroup to came out with the wonderfull news of 500% oversubscription on the day EQUITY begins trading.This ensures that the bar is set so high for EQUITY ,and that ScanGroup will be waiting to reap if that bar is not reached. I knew i liked the SG management, good thing i bought 50,000 shares through 10 proxies.

  19. Apexquest

    Scangroup’s assertion that they will allocate the first 10,000 shares
    to category members of the public can not work. I think the most any individual investor will
    get, in my subjective estimate, (assuming only about 10,000 individuals
    applied for exactly 10,000 shares) is around 2,000 shares in the BEST
    (highly emphasized) case scenario.

    See more on apexquest.blogspot.com

Comments are closed.