Monday, September 28, 2009

The KenGen Ksh15bn bond beneficiaries

Going by the debate so far, the 12% bonds seems to have tickled the interest of retail investors who usually stay away from bonds given the return is far lower than current or expected interest. Ther reasons for this change are many but a major one would be changing perceptions about the NSE. How will the different players benefit from this bond?

  • Retail investors:- despite a drop in inflation, its unlikely that it'll go below double figures before 2012. That means that in real terms, a retail investor will be making a loss from investing a Ksh100k of his in the bond. Although its unusual in Kenya, you may not be able to get the full principal in the first 2 years. It'll be 2017 before you double your money.
  • High net worthy: If you have Ksh5m and the risk-aversion of a typical elderly investor, then the 12% is sound return. However, NSe shares pay over 10% in dividend alone.
  • Money market fund managers: will love this bond because it make them very competitive against savings accounts.
  • KenGen shareholders: interest payment of just over a Ksh1bn will hit the P&L every year. In the first few years, there will be no concomitant revenue from the project to offset this. Something to ponder?
  • Electricity consumers: should hopefully see fewer rationing episodes.

The bond offer closes tomorrow.


Ssembonge said...

Maina, you left out the shareholders.

bankelele said...

re shareholders: i recall kainvestor said shareholder dividends will dry up

MainaT said...

Fellas- I've increased the font size on the post

Samora said...

Maina, the NSE is offering stocks at such low multiples of their earnings that I would recommend people to invest there instead, both for dividend growth and capital gains. Jubilee for example is selling at 7 times its earnings.

Samora said...

Maina, on another note, I have just finished a new article on its about the failure of vision 2030, its bound to cause sparks so kindly read and comment... thanks

MainaT said...

Samora- that is very true re the NSE. I think the issue for them is the time horizons are getting shorter and shorter for making serious returns pre-2012