Centum Investment just impresses me with their over-optimism (if there is anything like that) when it comes to their dwindling performance and aggressive investment plans. Despite its Full-Year 2008 profits dropping 64% (to Ksh.313.2 million; investment income dropped by 33% to 392 million) and making some unwise investments in Uchumi and RVR (Rift Valley Railways), the investment firm is going forth with an aggressive 5 years plan (2009-2013) and has announced a Ksh.2 billion bond issue.
It has already appointed transaction advisors for the issue set to open in three months time and is seeking regulatory approval for the same. cash raised in the bond issue will be invested in regional securities (both public and private) taking advantage of the investment opportunities created by the global recession that has seen value of securities dropping significantly as foreign divested.
The firm had issued a profit warning earlier in April indicating that it expected its full year profit to fall by up to 80% mainly due to an 84% drop in the value of its holding in RVR. The bear run at the NSE further eroded gains realized by the firm from publicly listed shares. Its current portfolio is valued at about Ksh.6.4 Billion from Ksh.8.67 billion in at its peak in 2006.
It has already appointed transaction advisors for the issue set to open in three months time and is seeking regulatory approval for the same. cash raised in the bond issue will be invested in regional securities (both public and private) taking advantage of the investment opportunities created by the global recession that has seen value of securities dropping significantly as foreign divested.
The firm had issued a profit warning earlier in April indicating that it expected its full year profit to fall by up to 80% mainly due to an 84% drop in the value of its holding in RVR. The bear run at the NSE further eroded gains realized by the firm from publicly listed shares. Its current portfolio is valued at about Ksh.6.4 Billion from Ksh.8.67 billion in at its peak in 2006.
5 comments
Centum is the firm to watch in this tough times. They will be reaping as the situation changes.
Tue May 12, 11:11:00 PM EATcharlse
@charlse: hope that would be the case. I'm holding on some diminishing shares in centum.
Wed May 13, 07:45:00 AM EAT@kainvestor,
Fri May 15, 06:11:00 PM EATI agree with you that Centum is well positioned to take advantage of any improvement in economic situation. However, this was the case even prior to the mooting of the Ksh2bn debt.
Where as I'm a huge fan of centum, I feel the fact that they have been able to withstand these tough economic times has been principally due to their ability to make the right investments, coupled with having a primarily long term investment perspective.
This coupled with the fact that they were relatively highly unleveraged, meant that they didn't have to make unfavorable investment decisions in the short term.
However the introduction of debt, in my opinion, changes the ballgame entirely. Decision making will no longer be based on a careful evaluation of the specific buciness case of their various investments but rather external factors. Case in point is obviously the fact they can do away with paying dividends in favor of exploiting available investment opportunities which can be clearly vindicated by the stability of income from dividends from their investments.
In particular for Centum, to me it appears like a case of risking i) returns that the company has and needs and 2) money the company doesn't have to seek returns that they do not necessarily need. I am not really a fan of hedge funds but that's where Centum are headed. My 2 cents.
I think it is always positive for the investment firms to be active during bad economic times. In most cases the prices are low in most sectors in such times and comes good times you reap the benefit. So I think Centum is the right path being active at this time
Mon May 18, 08:09:00 AM EAT@uginvestor: i believe the debt won't really relegate the investment firm into a short term outlook. what I'm worried about is the type of investment they have been engaging in recent times.
Mon May 18, 06:30:00 PM EAT@Kachwanya: i t gree with you. its Centums time to accumulate investments.
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