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.

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..

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