NSE: one step back, one step forward

Stockbroker closure: [website of Discount Securities]- another stockbroker may have gone under with doors closed and no more client processing until further notice from KPMG who may be the new receiver managers.

Like with other collapsed firms those-in- the- know (informed investors/insiders) took their money out of that broker and moved accounts before, leaving the retail rural crowd wailing. At worst, it’s the third broker to collapse in two years, at best this will be a bridge to takeover of a struggling broker by a commercial bank

Uchumi Profitable – Over the weekend, Uchumi continuing their turnaround plan published year end accounts (June 21008) showing a return to profitability for the company in receivership. However the net asset position is still critical and a strategic investor/new shareholder remains key, as the company will not be able to trade its way back to the NSE

Uchumi Financial Summary
June 08 ; June 07
Sales 6.79 billion shillings ($97 million) in 2008; 4.5 billion in ’07
Gross profit: 1,549 million ; 964
Operating expenses 1,254 million; 1,068
Finance costs 189 million ; 152
Profit before tax 106 ; (257)
Fixed assets 729 million; 840
Net current assets (553) million; (321)
Total assets 176 million ; 499
Reserves (-2 billion) both years

13 thoughts on “NSE: one step back, one step forward

  1. Chebet

    ..maybe just one step forward??? me thinks:-0

    yes, It’s now official KPMG are the receiver managers to Discount securities due to what what the CMA & NSE refers to as “corporate governance challenges.”

    But, “gone under’ in my opinion are strong words to use at this point

    if i can quote

    The Authority will not suspend or revoke the licence of Discount Securities Limited during the period of the intervention. The firm will remain open and will continue trading at the Exchange under this arrangement until such a time that the authority will determine’

    But tehn again i will quote…
    “together with the principals of Discount Securities Limited will assist in finding viable third parties to invest into the company.”

    it is not statutoty management yet…is it still one step back?

  2. bankelele

    Chebet: the NSE is in a grey area, and I hope they check if they are on sound legal footing.
    – I doubt if anyone believes the broker is ok, and will likely be swamped by crowds of worried investors tomorrow. Remember, DSL is nationwide, KPMG is in Lonrho only.
    – Does KPMG have the capacity or permission to trade shares? And Githaiga may choose to challenge them in court
    – If not a receivership – what is this? That’s why I hope it’s just ( a step forward) to mid-wife a takeover to a new owner who hopefully understands the problems at Discount

  3. Ssembonge

    Losing your money to a rogue broker is much worse than losing money due to a bad investment decision.

    I read over the weekend that dollars are fleeing sub-merging (no longer emerging) markets.

    This kind of news will accelerate flight to ‘quality’. Russia is currently paying a high price for its excesses when it comes to croynism.

  4. Maishinski

    After the crash, hedgefunds will be looking for a quick recovery.

    Where else can you get spectacular returns apart from Frontier Markets?

    I see a Bull in the horizon…

    (Please note: this is not investment advise)

  5. Mashatall

    The chickens are coming home to roost, and i cannot feel sorry for the firms going under. Mbaru was smart enough to make his quick money and exited well before the problems came to light under his watch, but should we hold him to blame same way others are now examining Greenspan’s stewardship in the US? NSE has not been innovative enough to widen the revenue base of this stockbrokers, and the old boys mentality should be blamed for the problems bedeviling the NSE. Let the floodgates open so that we can separate the boys from the men.

  6. Mugi

    Banks, you are right. This is, in effect, statutory management. And, stockbrokerages are like banks, once clients lose confidence, they will “run” on the stockbroker leading to the collapse.

    Nyaga was a “one man” outfit. Discount was a “family” outfit. Perhaps banks you can help the “mwananchi” by publishing the shareholding structures in these brokerages and investment banks

  7. MainaT

    Simple question. Does any investor believe DSL has the capital to keep going?

    The wording was to pull wool over the eyes of any simpletons.

    Run and don’t look back.

  8. Anonymous

    So does this mean that those of us who have our shares on the NSE and have used Discount Securities as brokers cannot reach our shares??

  9. Chebet

    I’l just retract a little from my initial response,if this DSL issue has been brewing for over 5 months now, what is the role of the CMA…whether it is statutory managemenet or receivership, investors must have confidence in people they trust.how capitalized ae these firms, is teh CMA not to gauge that, clearly someone has not been doing their job, andyes, this “one man”, and “family” arrangemnets better have viable second and third parties to invest into them.

    I second Muga..Banks, any chance we can get to know the frameworks of these stock brokerage firms, so we can run!

  10. bankelele

    Ka-investor: we all hope not

    Ssembonge: I agree on the pain of the loss. But anyone feel sorry for Russian billionaires?

    Maishinski: nice post at your site

    Mashatall: Mbaru is a lesson in knowing when to walk away
    – On revenue base, I remember visiting a Discount office in Mombasa (a few weeks before elections) and it was very empty. People blamed the wait for the Safariom IPO or the then apparent (ODM lead), but it must have been expensive for any stockbroker to maintain a nationwide office with few transactions

    Mugi: exactly you must have confidence, which you can verify with a comparison between broker statement and CDSC statement, and which you can observe in promptness of orders and payments

    Chebet (and Muga): I did a post a while back to shed light on broker owner info (http://bankelele.blogspot.com/2008/05/wanted-nse-ii.html)

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