Quote:
Originally Posted by Babs_O
From the Q1 result just released Skyebank has been given both a short and long term buy recommendation by IBTC researchers. They forecast a short term price of 20.9 (22% appreciation) and long term price of 26.12 (51% appreciation).
Factor in the effect of new funds injection in a 1 to 2 year window Skyebank should do more than UBA at current market prices.
For ver short term traders this info is useless as they have more time to watch the markets and cycle-in and out. But for those not blessed with such time / expertise this may be a good time to load Skyebank both on the floor and in the IPO.
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Given the fact that the 14.00 Naira offer for subscription price is only 20% discount from the technical suspension price of 16.84 Naira (i.e., after the markdown of 35 kobo dividend on 14 January when the offer opens), an investor might be in a dilema as to whether to buy from only the secondary market, which does not entail having to wait for several months and risking substantial under-allotment and returned money - simply because of 20% discount (and, of course, about 2.5% transaction costs in the secondary market).
Second, one should not beeasily carried away by the apparently robust Q1 results released today. Access Bank released in early July a Q1 profit figure of 3 billion Naira just before its public offer was about to start. Today (i.e., 6 months after), it released a combined Q1 and Q2 profit figure of just 4.8 billion, implying that it made only 1.8 billion Naira in the 2nd quarter! It promised in its offer prospectus over 13 billion Naira profit for the year ended 31 March 2008. One wonders how this can be attained by recording only 1.8 billion Naira in the last 3 months to 31 December 2007. In a similar vein, FCMB projected over 15 billion Naira for the year ending 30 April 2008. But, in November, it released profit figure of just over 5 billion Naira for the first half of the year. One wonders whether the remianing over 9 billion Naira can be made in only the 2nd half of the financial year. From indications, it appears these relatively small-size banks give misleading and bloated profit projections to lure investors to subscribe for their public offers. One can only hope that Skye Bank projections would not suffer from the same. The promptness and timeliness with which they release overly impressive quarterly profit figures just before commencement of public offers makes the releases to be suspect, particularly as such releases are not vetted by external auditors or any regulatory agencies but they are simply what the bankd claim them to be. The same banks are hardly known for prompt releases of results at other times apart from when they are just about to come to the market. Imagine Skye Bank releasing Q1 result within a week after end of the quarter! Had that ever happened before? The same thing Access Bank did in the first week of July 2007, and Bank PHB in the first week of October when it releases an overly fantastic profit figure.
I think we should mainly evaluate these small-cap banks other than on the basis of their very recent profit releases or projections. If we go beyond this, we would notice that the 14.00 Naira of Skye Bank offer approximates the price at which it was trading in the secondary market some weeks before it was placed on the technical suspension. We all know that technical suspension prices are typically manipulated, rather than being market-determined. So, the 16.84 Naira (or, 17.19 Naira until commencement of the offer on 14 January) technical suspension price must have been manipulated to reach there within the last few days before the suspension. The actual market-determined price was around 14.00 Naira. In effect, there is hardly any discount on the market-determined price vis-a-vis the 14.00 Naira offer price.
The above is not to suggest that the offer is not good. It is only to highlight possible risks involved. The same risks broadly characterise previous public offers by many other small-cap banks. But despite such risks, investors still get good returns and smile to the bank. So, I not only recommend subscribing for the offer, I too will find money to do the same. Afterall, risks are inherent in all investments and, indeed, all human endeavours.