Tuesday, November 14, 2006


EVEREADY IPO

I just finished reading the EVEREADY prospectus.My personal opinions are in blue below.
I'll concentrate on the qualitative factors of the company and the IPO.(i think the prospectus covered the financial details adequately).
ColdTusker has summarised the Financial details on his blog
From the prospectus:
-The Par value of the shares was Sh1,000 but a split was done(Pre-IPO) of 1000 to 1 and shares with a par value of sh1 issued.i.e. without the split the shares on offer would be less than 10 million.

-The shares for sale are offered PRO RATA by existing shareholders to the public i.e. its not only SAMEER getting the cash. ICDC, ICDCI and EVEREADY inc. will also benefit.

-The firm concentrates on selling Zinc-chloride and Carbon batteries because we are too poor to afford the latest Lithium, Ni-cd batteries and Rechargeable ones that are common in the Developed markets.

-They have lots of cases by in court brought by former staff for Health complications brought by chemicals used in the Manufacturing process and for benefits.
Most of the cases are covered by insurance so little or no risk to the firm.

-The regional battery market is price conscious and not quality driven i.e. people buy the cheapest battery, not the best.

-The biggest plus is that EVEREADY has a good distribution network that reaches all over the region.
This is what saved EABL from the Castle-South African Breweries onslaught. EABL had a good distribution network in Kenya and South African Breweries did not have one.
OPINION
By all means buy the shares,they wil rise and you can make a profit.But given the over-subscription you may not get all the shares you apply for.
Long Term Outlook
Unless they change their strategy i.e. import Batteries for sale. they may not completely overcome the challenge from the 'China' batteries

7 comments:

Holy Cow said...

There are cheap Chinese imports in the supermarkets/streets (Golden lion) @ 28/= Tiger @ 20/= while Eveready the cheapest is around 45/=
Price is the major issue to the majority of batteries consumersare those whom price matter to.
Was also suprised to find genuine eveready Batteries that were manufactured in Indonesia in stores.
Finally, PriceWaterhouseCoopers( who in their professional opinion allowed the Uchumi rights issue) are the company accountants, that gives me cold feet. Anyway, i'll go for minimum.

pesa tu said...

@HolyCow: Yes, price is the determinant in this market.thats why i think they better shut down the factory and import the Batts. from or through Egypt(COMESA advantage).This may make their batteries cheaper

if u read the prospectus carefully, you will notice that only Size D batteries are made here.The rest are imports through the Energergizer Singapore subsidiary(but are manufactured all over the world)

U r right most of the Big 4 Accounting firms thrive more on their reputation than skills.especially on the Traditional Accounting+auditing work.
But for complex financial stuff i.e. Project Finance,Actuarial work and Complex Financial stuff they r pretty good.

mwasjd said...

Unlike Scangroup, I've not heard anything of bonding by current directors/shareholders. But I must agree that Eveready name is a household name so oversubscription is likely resulting in a price gain.
Nice one Pesa Tu but you haven't said how many you are applying for...

bankelele said...

propspectus now online (http://www.eveready.co.ke/inner.asp?cat=investorinfo)

pesa tu said...

@Bankelele:thanks
@mwasjd: 2,000 shares.No need to bond directors given the Technical amts(with Energiser) and Managemnt support from Sameer(Look at the Mgt. fees) they r in for the Long Term

Ken said...

Jesus ! Blogger beta sucks bigtime.

You have a great blog Pesa Tu. Thanks for the highlights. Must admit I'm in on this IPO just for the current euphoria.

One inkling feeling I cant get out of my mind is that the current sharholders sight a storm ahead and want to lighten and reduce the risk.

Have you any info on how much the battery industry has been losing out on cashflow specifically due to the rechargable battery market?
Many of their former consumers now seem to prefer ipods, mp3 players, walki talkies, lamps, toys... etc with rechargable batteries effectivelly reducing their cashflow

Keep up the good job u def on my rss reader it's a pity i dont comment so often

pesa tu said...

@Ken:Thanks for the plaudits.
Yes,rechargeables have hammered batteries but the initial purchase price is still too high for this market.
LEDs are what may finish torches and batteries in this market.
Coutesy of http://e-nyce.blogspot.com/ check this company"http://www.cosmosignite.com/"

Yeah, Blogger beta sucks.Too much hassle to connect.