A few years ago, Eveready East Africa had an initial public offering of 30% of its issued (63 million) shares. The issue came hot on the heels of the Kengen IPO, probably hoping to capitalise on Kenyans' excitement in the stock market. In hindsight, the firm was overly optimistic with the IPO, expecting Kenyans to snap up the shares as eagerly as they did the Kengen ones. We all know Kenyans are a uniquely peculiar lot and the Eveready IPO is a testament of that. Prices went south faster than a matatu can overlap in rush-hour traffic!

Fast forward to 2012 and the Nakuru-based battery cell maker is in trouble. The company faces stiff competition from counterfeit products and cheap imports originating from eastern economies like China and the share price is currently trading at KES 1.70 (as of the close of the Nairobi Securities Exchange on Wednesday 16 May 2012). This represents an 82.11% loss in value from the IPO price. In simple terms, if you had invested KES 9,500 shillings to purchase 1,000 shares in the IPO (the offer price was KES 9.50), your investment in Eveready is now worth about KES 1,700. If you factor in inflation over the years, your investment in Eveready in the IPO is now worth about KES 1,006.

Taking a look at the share’s performance over the last 5 years, the dark cloud looming over Eveready becomes even more clearer:

[caption id="attachment_7214" align="alignleft" width="626" caption="Source: Bloomberg.com"][/caption]

The company's turnover has dropped steadily over the last 5 years. Profit after tax has had an even more dramatic fall. The profits dropped by 94% from KES 126 million in 2007 to KES 17 million in 2008. The profits then increased 58% in 2009 and then dropped 69% in 2010. In 2011, the company (finally) registered a net loss of KES 123 million.

Run!

A deeper look at the firm's books indicates that things are not so rosy. Debt ratio, a ratio of total liabilities and total assets used to indicate how much of the assets are paid-for by debt has increased every year over the last 5 years. From debt ratios of 0.5624 in 2008 to 0.7236 in 2011, it means that more and more of the company's assets are paid for in debt. They say where there's smoke, there's fire. If you ask me, run. Sell. Now. While you still have that KES 1000.