Saturday, July 08, 2006



NAKUMATT: THE IPO................sooner than you think


Nakumatt has been in the headlines for the past couple of weeks for all the wrong reasons.
I'm sure by now the owners of Nakumatt know why Charles Njonjo has big stakes in listed companies like CFC Holdings or CMC, while Total man(Biwott) has his flagship investment in a comapany(Kenya Oil Co.) which is only 20% owned by the public listed on the Nairobi Stock Exchange.

On the other hand Meralli tries to list or co-own, his major investments with influential personalities.e.g. the MD at SASINI is a former high ranking civil servant.The other rich Kenyan, Mr. A.S.M. Ndegwa of First Chartered Securities, keeps an ultra- low profile.

The reason all this men behave the way they do is that they have learnt what all rich men have known upto and before John D. Rockefeller have known- "Everybody wants to be rich but nobody likes a rich man"

Yukos learnt this the hard way when President Putin seized and sold its assets.By listing a tiny stake of their assets the large investors get thousands of small shareholders , who not only ask stupid questions at AGM's but provide protection against Governments and individuals who want to aquire their assets unfairly.

Imagine the furore if the Government attemted to shut down CFC Bank or take-over Kenya Oil. All those shareholders who rush for the free packed lunch at the AGM will be at Nation Centre protesting. The sound bites that they will be giving the TV stations won't be pleasing at all to the Governmet which is headed by elected representatives(M.Ps). Of course, no Government would proceed with an unpopular course of action. So such institutions are protected from arbitrary Government actions.

For Nakumatt, to get protection against future State actions, they need to list a sizeable stake of the firm on the Stock exchange. Failing so, you will hear more 'revelations' in another couple of years.
My bet is that the Nakumatt owners being smart ones have thought the above scenario through and will list Nakumatt in the next 36 -48 months.(i'm willing to bet on this).

12 comments:

bankelele said...

The Nakumatt FD touched on this on his interview on NTV last week, saying IPO would be in 2009 (earliest time, by which they will have had 5 years of profitability, unless CMA changes that rule)

kuoasan said...

I have to say, I did not figure this being a plus!

Now when I think about it.... Uchumi was a cash cow (back in the day) which if not privatised would have been milked dry!

KPLC was milked dry coz of substantial government control.

BTW, merali is not someone I would use as an axample of a "honest" businessman BUT he is shrewd. He is still there even after moi left!

His KDN is expanding fast & will be bigger than all his other firms (except Celtel).

kuoasan said...

Hmmm... will the CMA allow re-listing of Uchumi considering it does NOT have 5 years of profits anymore?

Nor is it likely to be profitable for the next 2-3 years!

The "being profitable" for 5 years is bullshit coz many of the giants in the US markets were NOT profitable when they went public.

Google was not even around for 5 years before it went public!

Microsoft was a teeny little firm when it went public!

Amazon was making losses when it went public!

E-bay would not have been listed on the NSE!

BTW, all the firms mentioned above have market caps LARGER than the total market cap of the NSE!

pesa tu said...

Bankelele:
Didnt watch the interview. but that shows they are smart. there many ways of beating the 5 year rule.Like reverse listing.

They could buy an already listed co. and shift Nakumatt into it. e.g. Buy a controlling stake in a small firm like City Trust, then issue more shares of City Trust in exchange for Nakumatt shares. Effectively listing Nakumatt.

Kuoasan:
No i didnt mean Meralli isnt the most honest bizman, it was just an example of his shrewdness.

Uchumi wont be relisted soon.
The 5 year rule is outdated ,i agree but most Kenyans are hardly aware of the dangers in the stock exchange, so are the regulators.
Remember for every Ebay, Amazon, there are 5 failed co.s who remembers PETS.COM?

Did you know most retail investors bought KENGEN without reading the prospectus?

But there should be a segment for listing those without 5 year profitability records

coldtusker said...

@Pesa - That is the risks that folks should be ready to take!

There will always be firms that will fail BUT the risks have to be explained to the investors. The AIMS section should do just that... These are firms that are riskier & the NSE + CMA + brokers need to explain that to investors.

As far as "financially illiterate" investors... either they need to talk to financial advisors or shauri yao! Capitalism!

I am NOT condoning fraud, non-disclosures, etc BUT if all the risks are spelt out then go ahead & list. If folks buy your shares well, great, otherwise you need to improve your business...

coldtusker said...

I agree with your Reverse listing BUT this is Kenya where the CMA are DUMBASSES & would scuttle a legitimate Reverse listing.

Neither would the ever greedy brokers support it. BTW, the CMA + NSE loves the huge fees they get!

See my write-up on this on www.coldtuker.blogspot.com

pesa tu said...

Coldtusker: Yes i agree with you-Risks must be taken in order to succeed.
People who invest with little information have been forewarned.BUT what if they dont read the info. that warns them about the risks?STUPIDITY is no crime.

I forgot there's a cosy little cartel(NSE+CMA+brokers) that stiffles inovation.

coldtusker said...

Equity is being smart by listing just the existing shares tho the brokers would prefer an IPO coz there is hype & increased fees/commissions for simply accepting applications!

Equity will save themselves cash spent on ads, brokers fees, etc... which ultimately translates to increased shareholder earnings!

coldtusker said...

Hey... how come I am not linked as a blog on your blog... PS... will do the same on mine!

gathinga said...

nakumatt will be as big as kengen. but are they guys in honest business. they were selling things are what appeared like below market price recently. that got me wondering

coldtusker said...

Sijui about Nakumatt's business practices... but that is KRA's job!

Regarding their selling prices, some retailers sell "loss leaders" at "below cost" so you come in & buy other stuff... I found this very common in the UK (e.g Asda, Tesco & Sainsbury) where milk was cheaper but intended to bring you into the supermarket.

Apparently, the retailers also get quantity discounts thus what is "below cost" might be profitable after rebates/discounts.

Nakumatt operates on a "margin" i.e. they get 10-30% of the sales price but the "seller" is an importer! That is why their sales were high but VAT was lower! They were just "renting" their space!

Smart folks these guys at Nakumatt!

pesa tu said...

@Coldtusker: Yep, agree totally but in this case sometimes instead of discounts the retailer is also an importer.