ACTIVITY 10: PURCHASE OF 1900 STANCHART AT KSH 270

DATE OF ACTIVITY:11TH AUGUST 2010

COST OF ACTIVITY 10:KSH 270 X 1900 SHARES= KSH 513,000

ADD 2% TRANSACTION COSTS = KSH 10,200

TOTAL COST OF ACTIVITY 10 = KSH 523,200

CASH IN HAND AFTER ACTIVITY 9 = KSH 986,090
SHARES UNSOLD AFTER ACTIVITY 9 = 100 STANCHART

CURRENT PORTFOLIO POSITION:
CASH IN HAND AFTER ACTIVITY 10 = KSH 462,890
SHARES IN HAND AFTER ACTIVITY 10 = 1900 + 100
=2000 STANCHART SHARES

RATIONALE OF PURCHASE

After exiting the counter about five days ago, the share has experienced a substancial price decline. I still hold the opinion that the share at least should be trading at the Ksh 320 range post half year results/pre rights issue.

Even with the temporary price correction, i expect the share to return to the Ksh 300 range once the details of the rights are released, especially if the rights are priced at below Ksh 200.

In January 2010, Stanchart announced the intention to sell their head office building. This transaction should be completed within the financial year 2010. I have a feeling that a bonus issue is in the offing with the end of year announcements next year in February/March because of the following:

1. The sale of building will raise at least Ksh 1B (any property valuer out there?), which would be almost enough to issue a 1:1 bonus (with 300M issued shares at a par value of Ksh 5, this would need Ksh 1.5B).
2. The bank will be celebrating 100 years doing business in Kenya next year January 2011. How else to mark such an occassion than to reward the shareholders with a bonus?
3. At the current trading range of Ksh 270-300, the share is becoming unaffordable in unit terms (To buy 100 shares one needs at least Ksh 27,000). Either a share split or a bonus issue is needed. A 1:1 bonus would effectively reduce the price to about Ksh 140-160 range.
4. When is the last time SCBK issued a bonus?

NB: The re-purchase of 1900 SCBK shares has been effected using mostly the profits collected to date. This is a highly speculative move especially with the share on a decline, but I am of the opinion that the share is worth it especially with all the expected activity on the share in the next six months.This is my investment horizon incase the market correction was to persist (which i doubt will last for more than two weeks).

To any person intending to start a 'copy cat' portfolio, It may be prudent to wait for a few more days before purchasing the SCBK share. This would ensure the share has stopped its decline(purchasing now may result in a temporary loss of value)

Happy hunting