After a long time now since the last IPO of CRDB bank the Precision Air has broken the silence. There has been several cross listing at DSE for the kenyan public companies like the recent one of Nation Media Group. But for the Tanzanian companies, Precision Air IPO is the silence breaker deal after a long IPO Scant period. Literally, PW shares will be nice to hold because whenever u see it in the blue sky you will be reminded of your investment. However, this cannot be investors interest!
Following the announced IPO Price of TZS 475/- per share I am very convinced that PW shares have been highly overvalued. Currently PW has a fleet of 11 planes, while KQ has a fleet of 33 planes, Kenya airways has more than 55 international and local destinations whereas PW has much less footprints.Also airline industry is characterized with lower dividends payout,higher PE and very vulnerable to fuel prices and Foreign exchange risks.
Simply I would not value PW shares higher than KQ shares. Currently KQ shares are prices at KSh.25/- an equivalent of Tsh.425/- at Nairobi Stock Exchange which I consider a better market than DSE which has less activity on KQ counter at TZS 1020/- and Market Capitalization of TZS470.85 bln. Honestly, PW shares should have been valued at TZS 250/- per share.
Finally, I would advice my customers to take a very precautionary approach towards the coming Precision Air IPO. If you really want to buy them for passion don't test the depth of a dam with two of your feet. Use part of your financial asset and spare the rest for TBL, ABG and many more to come.
Regards,
Emmanuel Akyoo
I think its make more sense if the number of share in issue are mentioned when comparing shares of different companies, the company with less No. of shares is likely to have higher unit share value(all other being equal). you can not use only non financial information to make financial analysis.... the value of the company is what determines the values of its shares(value/No of share) and is determined among the other by ..its asset base(in this case if planes, are they owned or rented) expected revenue and their growth potentials(it should be obvious with small size of precision , it have higher potential), the capital structure before and after issue (the debt/equity ratio)etc.... the number of fleet,destinations does not give a ground for this conclusion.
ReplyDeleteI welcome a debate.
Luckson.
luckykataraihya@yahoo.com
0779 77 22 33
Well, I agree with Akyoo. So far the biggest blunder in the market was that of TOL.
ReplyDeleteSince we cannot get all information on all financial data of Precision Air (and surely we can't)we can only rely on comparison, and Akyoo's is logically well argued. DSE is not efficient so having to rely on available information is not wise..... because there is no enough information. What drives the market is purely information my friends
Mafuru Eric L
0767 428430
Thanks Luckson and Erick for your comments, I tried to find out the number of shares and I found out to be as follows.
ReplyDeleteKenya Airways Limited KA 461,615,484 shares
Precision Air PA 193,856,750 shares
I would like to urge investors to be careful with this IPO.
Current Net Assets 15,442,569,000(100%)
New Capital from IPO 26,895,078,195(30.35%)
Precision Air is being sold at around six times(92,081,956,250/15,442,569,000) its book value. At this time when fuel is selling at its peak price, terrorism risks,and inflationary economies of east Africa this price does not get through my mind. In one of the pages of prospectus it gives a PE of 50! that too high comparing with other listed companies in the market.