Is investing in an advertising comany in Kenya a smart move. This company is new in the Stock Exchange market?

The company has the largest market share in East Africa but do advertising companies make good material for sound investment?

Is investing in an advertising comany in Kenya a smart move. This company is new in the Stock Exchange market?
No ad co are service based and has no capital equipments.
Reply:No
Reply:Start by reading news daily...Havent ya heard about the woman in Delhi being duped of 1.5 Lacs....By someone only she knows in Nigeria..Although Kenya sounds to be more stable state then its neighbours...Ya never know...Good Luck
Reply:I would look at the company more or less in the same way you would consider an investment in any other company (with some caveats). The comments regarding Africa as an unsound investment destination are generalizations and somewhat outdated if not just plain wrong.





First look at the company's fundamentals to determine if its a good value as is. Then you should factor in potential exchange rate issues. For a while now Kenyan shilling has been gaining ground on the US dollar. If this continues, any dividends the company may pay in the future will be worth relatively more in the future than they are now (in US dollars). So keep in mind that exhange rates will influence your profits or losses.





Secondly, consider your transaction costs. Brokerage fees and any associated transaction costs should be factored into your investment decision. With African markets these can be significant.





Thirdly, as sooo many people love to harp on, there is not quite the same level of regulation in African markets (including Kenya) as in the West. So if you are using a local broker rather than an international bank, be sure to get a reference first.





Overall, the Nairobi Stock Exchange is well regulated. As a whole it has performed pretty well in recent years. More state owned companies are being privatized (like KenGen) and this means more liquidity in the market (which is good). Most encouragingly, there is burgeoning domestic demand for shares from pension funds and individual investors. This will tend to push up the stock market as a whole over time - irrespective of individual company performance.





As far as politics are concerned. Kenya has long been a stable country. There are indeed concerns surrounding the next presidential elections. You should expect to see the market dip significantly at that time. But otherwise there are no large macro-threats to either the economy or the integrity of the state. As evidence, just consider that the price of oil, which has to be totally imported into Kenya has gone through the roof. Yet the economy grew instead of stagnating as might have been expected. And also note that a moderately severe drought over the past year has hit large parts of Kenya but again, the economy continued to grow. The neighbors that matter: Tanzania and Uganda are also stable and growing and interstate trade is slowly being liberalized. Ethiopia and Somalia of course are not as stable. But really, the interaction between the two countries and kenya is limited. Its mostly unpopulated desert at the boarders. So dont worry too much about Somalia.





The most important thing is for you to do your homework. Look at the company like any other. And dig a little deeper since they probably dont use US GAAP in accounting. They most likely us IAS GAAP which although comparable results in some differences in reporting. Read the East African newspaper online (free) to understand the regional economy and go for it.





Most importantly remember that your investment should be part of a diversified portfolio. In otherwords dont put all your eggs in any one basket - even one made in kenya.
Reply:When considering investing in foriegn companies, there are several things to consider.





1) How safe is it to invest there - How is the market regulated? Is it regulted? Many countries do not have the reporting and regulatory laws that the U.S. and other major contries do. The result is that many times, yo do not know if you can trust the numbers.





2)Political risk - What are the chances that the gov't can be overthrown and the market ruined as a result. If this risk is high, avoid those stock.


3) Economic risk - How strong is that countries economy? How well established is it? How much Gov't interference is there?





These are all things that have to be considered before investing in foreign companies, especially in emerging countries.





Personally, I would not go near a company in most african nations, due to the high number of wars and the high political instability in the region.





While Kenya may be stable, what about it's neighbors?





It is very high risk, but do the rewards jsutify that risk?