Kimunya confirmed NSE's worst kept secret, Kenya Re won't happen in March but May and KenGen's 19% offload is being brought forward to next month. Kenya Re will most likely be the equivalent of the grocer who hides rotten oranges at the bottom (why are they taking on KNAC's assets at this stage of the game?), but at 60m shares will still be oversubscribed. KenGen's offload is a few months late or 1 year too early i.e. the timing is wrong. Reason-the tariff fiasco with the govt having realised too late that it had created a rod for its own back by committing on a prospectus to pay KenGen their real cost of production. So far, Treasury is covering the gap between what KPLC can profitably pay to KenGen and the amount KenGen needs to profitably continue to produce electricity. Govt is in such a mess that they paid a consultant to tell them that yes, you'll have to ask consumers to pay for the real and higher cost of producing electricity-many could have told the govt that without charging them! Without some confirmation of this, investors should stay away from the offload and buy the shares at k10-15 in the secondary market later this year.
HFCK announced their FY06 results, PBT was up 56% primarily on lower staff costs (does that mean its not growing any more?) and lower loan loss provisions (good-HFCK nearly went bankrupt from carrying too much of the stuff). So not driven by revenue growth (1% up on FY05) and there was no dividend. There is still confusion over strategy. HFCK now wants to fund construction of properties. So it will be carrying two types of risks in its books-property not sold and then when its sold, it'll obviously have the more conventional lending risks. This is a market that KCB seems to be way ahead in so this investor doesn't see how HFCK will survive as a standalone entity to see out Frank Ireri's 5yr strategy. The strategy will require financing of around k13bn which I am not sure the proposed rights issue will bridge-perhaps a better idea would be to float a 25 year bond.
The current correction/bearish sentiment at the NSE is a perfect opportunity for the long-term stock investors most who will say its a necessary rite of passage that imparts important lessons for one to be successful. There is sympathy for those that were hoping to use the NSE bull run to raise short-term funds which there is quite a few in the current investor population, but not for the get-rich-quick crowd. For the rest, use this period to accumulate in stocks you believe will grow your capital in the medium to long-term.
Kenya Bankers Association revealed that Ksh20bn of the bad debts in the banking system is held by 100 defaulters-shouldn't they be letting all financial institutions know who they are?