XML FeedsBuilding A Portfolio
My Potential Share Portfolio
African Bank Investments Limited (Abil)
Focus
The focus of the group is to underwrite largely unsecured credit risk through the provision of personal loans to the formally employed emerging market.
Investors’ Opinions
Ok, so now I’m going to look at the P/E ratio of Abil as it generally indicates what investors think about the company’s future.
On the Sharenet site I look the share up using the “Quickshare” function. This takes me to a page with quick fundamental analysis of the company. The p/e ratio is 13.02. Now on it’s own this number means nothing so it’s useful to compare it to other companies in the same sector.
The lower the p/e ratio the better for the company.
History
The company first listed on the JSE in 1998 and looking at past income statements they’ve showed good growth since then. What is encouraging to me is that despite the introduction of the National Credit Act in the middle of this year, the company has increased diluted headline earnings per share by 20% and revenue increased by 18.3%.
Quoted from their reviewed results for the year ending 30 September 2007:
“In addition, the group’s proactive approach to and early adoption of many of the National Credit Act requirements, resulted in a smooth transition to the new Act on 1 June 2007. This paved the way for the unlocking of the opportunities that the NCA presented, resulting in a strong 4th quarter, with sales of new loans up 53% over the same quarter in 2006. Finally, ABIL launched its offer to acquire 100% of the Ellerines group, affording the group the opportunity to leapfrog its growth and expansion strategy over the next 3 to 5 years.”
ABIL’s intention is to “entrench its position as the market leader in a larger, more competitive and fast changing unsecured credit market, fuelled by the introduction of the NCA and a growing and transforming economy.”
Management
What’s encouraging to note is that directors, management and staff holds 5.92% of shares in the company. This always indicates that the company itself and the people that run it have confidence in themselves.
The company is headed by the CEO, Leonidas Kirkinis, who has been with the company since 1997
Forecast
I read Imara Sp Reid’s report on the group and they had the following to say:
“Without taking into account Ellerines, our forecast for Abil for the financial years 09/08 headline EPS growth of 15% to 309.7c for a FPE of 11.2x.” They note that “it is well below management’s forecast of advances growth between 30 and 35% due largely to the ongoing polic of reducing interest rates.”
EPS = Earnings per Share
FPE = Forward PE
Broker consensus forecasts (found under “Subscribers” on the Sharenet site)
Recommendation: BUY
Online Research
In an article on Moneyweb (by David Carte – 14 May 2007) the following was said about Abil – “Abil has much still going for it – rising employment and the ability to take a less cautious attitude to lending…” They plan to increase their network to 700 outlets in the next 2 years.
I also read a very interesting article by Adrian Clayton (Moneyweb: 24 October 2007) where he talks about the pro’s and con’s of Abil’s acquisition of Ellerines. He believes that “the takeover of Ellerines by Abil is a logical transaction that is likely to enhance the value of the combined group over time.”
Have a look HERE at the company’s latest annual report:
Conclusion
I like the sound of this share and their progress on the JSE thus far. They have a sound management team, a high dividend yield and a good growth forecast for the years ahead. The acquisition of Ellerines should boost the company and provide more scope for business in the future.
This is definitely a share I’m seriously considering adding to my portfolio!
If anyone has any comments or ideas about this share please feel free to comment!
Next Time
I have a look at Stefanutti & Bressan Holdings in my next diary post as a possible addition to my investment portfolio.
Signing Up!
My Online Trading Adventure
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The first step in setting up an online trading account is to visit Sharenet’s website and have a look at the brokers available on the site. By going to the “Trade” section, you’ll see the selection of 4 brokers and a handy hint is to click on the “Compare Rates” section to see how much initial investment money you need and what brokerage fees each broker charges.
Because I’m only going to be using the broker to carry out my instructions, I’ll be paying a brokerage fee according to the value of the actual transaction.
THE FORMS
This is the part I was a little intimidated by as some of the language used on the forms were a bit beyond my (somewhat lacking) financial knowledge. It started off okay as you first have to fill in basic details like your name and email address. The second part involved contact and employment details and addresses etc. Fine, I thought, no problem.After I completed this I was taken to a page which detailed the supporting documents (also known as FICA documents) I needed to accompany my mandate (or essentially my application) form. These FICA documents are important and they usually don’t allow you to open an account without these documents.
*FICA stands for the Financial Intelligence Centre Act and was established in 2001 to curb money laundering and prevent criminals from making money. Because of this, you need to provide proof of your identity and address before you’re able to invest so they can do a background check and ensure that you are who you say you are.
After printing out the mandate form I had to fill in a few more details, some of which confused me quite a bit. Despite the fact that I had registered earlier as an individual (and not a company or CC), there were still some areas they requested I fill in under the “personal details” section. Things like “Co. Vat No" and “Country of Incorporation” had me stumped for a while until I asked somebody what they meant and was told to just leave them blank.
Also note that as a private investor I needed to tick the “non-discretionary” circle as I want an “execution only” portfolio not managed by the broker company. They will merely carry out my instructions.
After initially each page and signing the last, I had to get two witnesses to do the same. Attaching all the necessary documentation together, I’ve placed them in a large envelope and am now on my way to post them to Imara.
Step one (and probably the easiest part) completed!
Regards, Marika
My Online Investment Adventure!
The tools: R20 000 to invest and an online trading account with Sharenet and Imara S.P. Reid
The mission: To invest/buy shares in a company listed on the JSE and document my progress and each step of this process
The goal: To hopefully make some kind of return within a year and show fellow beginner investors that investing isn't the deep dark unknown terrain we believe it to be!
So there you have it, armed with some cash and the instructions to document my every move on the stock market (from signing up to how I actually go about choosing which shares to buy), I'm about to embark on an investment adventure that aims to expose how easy (or difficult?) investing actually is.
This online diary will record my every move and will take you through my thought processes and emotions that go hand-in-hand with investing. As a novice in this field, I'm both excited and nervous to discover what all this entails! I only hope that what I learn from this experience will benefit other beginner investors and encourage them to also take the plunge and start investing themselves.
So (deep breath), wish me luck and join me as I enter the exciting and hopefully not-so turbulent world of investing!!
Regards, Marika