One reason why Scangroup share price went down is that the price had been pushed up by speculative buying,anticipating increased profits. Once the news was in there was no more reason to wait.

Buy the rumor,sell the news,is wise market advice born from time-tested trading experience. The market often prices in change before it occurs. Then,when it does occur,the market surprises the herd by moving in the opposite direction than was expected.

Also,note Scangroup reduced dividends from 90 cents to 75 cents per share. Savvy market operators have noted the signalling effect. Their revenues and profits may NOT grow sufficiently this year to sustain the previous dividend payout with the new higher number of shares after the issue of new shares to WPP.


Opportunity calls but few respond.

They expect 10-12% revenue growth in 2009. That is less than inflation. AdSpend has dropped as companies cut back on expenses. ScanGroup's 1.3bn in cash will come in handy as acquisitions become cheaper but this is over the next 2-3 years.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

I think that is a rather unfair characterisation. Sure they are sitting on a pile of cash - almost a billion shillings to be precise. Is that a bad thing in a declining economy? Most other companies (Centum,Trans Century etc) would kill to be in their shoes. They can bide their time and wait to pounce once an appropriate acquisition comes along. In the meantime,banks like Stanchart are offering 10% per annum for high value deposits. Infrastructure and all sorts of bonds are also coming a plenty. Scan can easily earn an additional Kshs 100 million or so just from placing their money on deposit which would be another 25% growth in profits in 2009.

Opportunity calls but few respond.

If cash flow is the only metric that one were to use to determine whether results are impressive or not,then I would agree with you. I however reckon the reason for this is that in light of the downturn,companies are demanding longer credit periods and rather then lose business,Scan is indulging them. After all,they had almost a billion in cash. This will help them counter other agencies,although they are pledging to improve on their cash management in 2009.

Scangroup is also not particularly bullish on the future and I think that's the reason for the cold reception following the results - and I for one do not like a company that lowers its dividends. However Q1 revenues are up 17%,which is not bad in the present circumstances. I would certainly BUY on price weakness and wait out the recession.


Opportunity calls but few respond.

GG,I agree but note that the issue of new shares to WPP was only completed towards the end of the year (at a price well above the current trading price). Dilution was therefore minimal in 2008 - EPS is reported on a weighted basis - both by period and number of shares. Of course the intention for the new capital was to deploy it in their core business. Scangroup has grown largely through acquisitions rather than organically. The fact is it is better to wait for firms to become desperate and buy companies at big discounts. You will remember Microsoft was rebuffed by Yahoo only for Yahoo to later see their share price collapse well below Microsoft's offer price.

I am sure the money will be put to good use in time. For this reason,I reiterate my argument that I would rather see a company with a good cash position in the present circumstances. Note only 50,000 shares or so have been traded since the release of the shares. A bid of 100,000 will see most of the supply dissappear,but I for one - I aint buying yet.


Opportunity calls but few respond.

http://grainsofmasala.blogspot.com/

This guy/gal makes a compelling case for ScanGroup.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

63/- is way beyond anything I would have thought!!! I do not get it... I really do not!

A company trading at a P/E of 35 more than double the market P/E really has alot of pressure to catch earnings up....

From the results it is highly unlikely scangroup match up to those standards....

My valuation of the counter is 45% lower than where it is trading now but i know speculators might continue to drive it up

@ youcant, I no longer have scan- I sold half the units @42 and the other lot @54.

Watching the price now I am almost banging my head on the table. However the stock is getting too pricey even after factoring in the acquisitons.

My estimate is that the stock should be trading between 45 - 50. Good luck to those buying at 62.

I've held a modest holding for sentimental reasons - I met Thakkar when they were at the Integrity Bldg in those days and was particularly impressed by his knowledge and approach to the business. Maybe I should dump and wait for to impending fall then pick up again.