Thursday, July 13, 2006

Scangroup IPO,to buy or not to buy!

The latest IPO on the block has not attracted as much media and public interest as did the recent Kengen IPO. Many friends have asked me skeptically whether to buy or not.

For Scangroup
Going through their prospectus, one sees a company that has experinced consistent and rapid growth over the last five years. This growth in such a market where they already control over 50% can only be maintained by acquisitions.

Against Scangroup
This business is dangerously dependent on the input of one man: Bharat Thakrar. Even though he has signed an agreement to stay in the company for at least five years, this remains a major risk.

The business of advetising is one that its difficult to predict. In kengen , we knew electricity consumption is growing by 7% p.a. Such prediction cannot be said of advertising and PR.

PROBABLE
However, the cash that kenyans fetched from kengen will work for Scangroup. This offer is liekly to be oversubscribed. As such it would be prudent to BUY..

KEEP?
In view of the shortcomings above, it would also be prudent to dispose and take the profit immediately it comes to the market

5 Comments:

Blogger coldtusker said...

Note that MOST of the proceeds are going to Bharat Thakrar since he is selling 60 Million of HIS shares. ScanGroup is selling only 9 Million NEW shares.

Detailed analysis on www.coldtusker.blogspot.com

5:24 PM  
Blogger Ken said...

Looks like Mr Thakrar is out to get rich. It would have been nice if they had stated their expansion strategy more clearly.
There is very little to invest in here, merely speculate.

6:59 AM  
Blogger gathinga said...

Ken,
Cant be sure now of his intentions. No one can deny that he has done well with the company so far. Not many indigenious enterprenours have managed to beat the multinationals especially in the sevice industry. What worries is that the cash going to the company is hardly enough for even a small acquisition. This would mean if the group was to make any substantial acqusition, they would have to raise funds from the market or banks.....coz Thakrar is taking most of the cash.

8:16 AM  
Blogger coldtusker said...

Gathinga is right... it's Bharat's choice coz its his cash! Bil Gates & Warren Buffett are donating their money coz its THEIRS!!!

Since Buffett & Gates sold their stocks in BH & MS respectively does that mean BH & MS are not good firms?

No, the firms & ownership are DIFFERENT but BT, WB & BG all continue to hold significant stakes in their flagship firms!

5:34 PM  
Blogger coldtusker said...

Well, I hope u bought the shares coz Aug 30 2006 the price was at 16/-... Unfortunately, the allocations were miniscule!
3.5 Million shares were sold in 2 days! Of the 69 Million float... 5% were "accumulated" by a few guys!

7:52 PM  

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