Apologies for the long-windedness but please read and be the judge!
My ire has been pricked by underweight's thread to the effect that Sameer is about to take off at supersonic speed. These are the sort of hunches that Seles has been railing about. Our market has a lot of unsophisticated investors,who will probably buy on the basis of such a thread. To call a spade a spade,there are far too many examples we can cite to show how many suckers have been conned like this in the past.
Sameer is a share that is normally thinly traded. If it goes up that will be the main reason and NOT anything else. Moreover,even the 500,000 shares traded today equates to only Kshs 2.5m. I cannot of course discount the possibility that someone will pump it and then dump it onto some unsuspecting novices. And then for a while,underweight will probably claim credit for prophesying its upturn. Some people will of course make some money – no doubt about that! It may give a good return for a little while,but let us compare notes this time next year and analyse it against the rest of the market. Woe betide those who will buy it the top of the curve. Just remember; A rising tide may lift all boats but when the tide recedes,some boats will be left floundering painfully aground.
If you were in the market a couple of years ago,you might remember when Sameer was pushed to 'stratospheric' levels (Kshs 38 or so) together with Sasini (Kshs 30 after adjusting for the split) to facilitate the entry of NEveready into the market. We all know what has happened since.
Last year’s EPS was Kshs 0.54,so in theory it is reasonably priced at a historical PE of 9.23. However,in truth,Sameer has been one of the worst performing and most inconsistent shares in the last 15 years on the NSE. IPO was at Kshs 34 (someone please confirm this). Has only ever given one bonus (1:2 in 1998),no split and as for dividends – it is more a case of now you see them now you don’t. Note that turnover went down by 12.7% in 2008 against 2007. A decline in revenue is normally an even worse sign than decreased profitability unless there is a very good explanation. After tax profits increased by 27%,- off a low base (but I hardly ever trust profit figures that are accompanied by a negative cash position and no dividend).
Can you imagine in 2004,this company had a turnover of Kshs 3,270,254,000 (2008 – Kshs 3,026,747,000) and PAT of Kshs 275,170,000 (2008 – Kshs 150,848,000)? By comparison,Car & General in the same year had a turnover of Kshs 629,100,000 (2008 – Kshs 2,997,332,000) and PAT of Kshs 37,430,000 (2008 – Kshs 211,644,000). There are others where the comparatives are even more astounding but I cite C&G since they are in a related line of business. Does Sameer sound like a share that has ever been on FIRE or is going anywhere,other than being given a short-term suckers push?
Sameer Africa (the tyre company) has NEVER had any shares in KDN. It does however have a 25% share in Sameer Business Park. The total investment in this venture is Kshs 140,000,000 which had a loss of Kshs 2,974,000 in 2008. Sameer Africa also has a fully owned subsidiary called Sameer Industrial Park,which provides facilities for manufacturing and other activities,with an investment of Kshs 120m. One wonders why these should actually be two different companies one essentially owns property used for manufacturing and the EPZ. The other is the new venture for the business park. Complicated structures in my experience send out red flags.
Bottom line is that unless something radically different happens at Sameer,any outsize returns will be short-lived. I cannot see the Kshs 140m investment at Sameer Business Park (out of a total shareholders equity of Kshs 2,135,566,000) proving to be the magic elixir. It is simply too small a piece of the pie.
Opportunity calls but few respond.