Centum property revaluation lifts its credit rating
Centum chief executive James Mworia during the company’s investor briefing in Nairobi on June 10. Photo | Diana Ngila
What you need to know:
42pc - Value proportion of Centum’s Two Rivers project the firm sold for Sh6bn.
Centum Investment has doubled valuation of the Two Rivers project in its latest financial report, indicating the real-estate project has grown six-fold even before phase one is completed. The investment firm that has now received a credit rating upgrade from GCR valued the project at Sh3.1 billion up from Sh1.5 billion last year and Sh576 million in 2012.
The South African ratings agency upgraded Centum Investment rating to ‘A’ from ‘A-’ based on its income diversification and revaluation gains that overshadowed its debt levels.
“Centum’s core investments have performed strongly in recent years, reporting growing cash yields and sizeable fair value gains- including significant realised gains,” said GCR in its credit report.
Centum made Sh1 billion from share sales last year having sold stocks at Sh1.913 billion after buying at Sh904 million.
Two Rivers project in Runda recorded the largest fair value gain of Sh1.6 billion due to construction of access roads to the construction site. Centum has built an overpass and underpass leading to the entry of the development and has also put up an interchange to ensure ease of traffic flow to the estate.
Last month, Centum’s management disclosed sale of 42 per cent of the Two Rivers project for Sh6 billion, a deal that valued the project at Sh15 billion. To execute the project Centum issued a Sh4 billion corporate bond and has topped it up with a Sh5 billion 10-year debt from Co-operative Bank.
Cash flow from Two Rivers is expected to start from next year following sale of bulk rights, residential housing presales and the commercialisation of the retail component, said GCR.
“Debt raised will be ring-fenced to the project and Centum’s exposure limited to its equity investment therein,” said GCR which is authorised by Capital Markets Authority to rate listed firms.
GCR, however, warns that delays in the real-estate projects, together with unexpected further cash requirements, could strain the resources of Centum and negatively impact its debt serviceability.
The company has also made a bid to buy out agricultural firm Rea Vipingo at Sh4.5 billion or Sh75 a share. A tribunal was recently appointed to settle issues surrounding the bidding after Centum sought to have the opposing bid cancelled claiming the offer was not definite.
Other projects being undertaken by Centum include the Pearl Marina estate in Uganda whose groundbreaking is expected next month.
Centum is also expected to review its valuation of its shareholding in Kenya Wine Agencies after the government agreed to sell a 26 per cent stake in the firm for Sh860 million to South African Distell. Centum owns 26 per cent of the wine agency which it had valued at Sh190 million two years ago.
The listed investment firm has diversified from trading in quoted shares to other investment options and geographical areas. Its financials show that the firm’s regional businesses, especially Uganda and Tanzania were the main drivers of income growth following a drop in the Kenyan market.
Income from Kenya fell to Sh3.4 billion from Sh3.6 billion; Tanzania grew to Sh716 million from Sh57 million while Uganda rose from negative Sh59 million to Sh437 million. Centum’s share price touched a one-year high of Sh46 per unit in the last trading session.
