KCB rights issue falls short of the Sh15 billion target

KCB posted a net profit of Sh2.8 billion in the six months to June, compared to Sh2.4 billion in the same period last year.

Retail investors have shunned the stock market since last year due to the slump in share prices as they tend to prefer a speculative market with wild price swings.

KCB’s performance sets the tone for upcoming right issue with pricing of offers taking centre stage.

“The key is pricing. The pricing has to be right if investors are to be enticed,” says Eva Njuguna, the head of equity trading at Sterling Investment Bank. Upcoming rights issues include TPS Serena (Sh1.2 billion), Standard Chartered Bank (Sh2.5 billion) and Kenya Power and Lighting Company (Sh10 billion).

The issues are set to happen in the second half of the year as firms race to raise capital to take advantage of opportunities in a recovering Kenyan economy.

Although there has been a recent downturn in market activity in both the stock and bond markets, analysts say investors are gearing up for up coming issues which also includes Kenya’s largest infrastructure bond to date.

Infrastructure bonds

The debt markets will see the debut of a Sh31 billion government infrastructure bond, a Sh10 billion Housing Finance corporate bond and the second tranche of the Safaricom bond which will be valued at Sh7 billion.

At an announced coupon rate of six per cent for the upcoming nine year infrastructure bond, debate is already raging whether the offer’s pricing will attract widespread investor participation.

Signs of tightening liquidity in the market are stoking concerns among debt and equity issuers as the KCB rights issue and the ongoing infrastructure bond act as market testers to gauge investor appetite. 

And if the KCB rights issue is anything to go by, then the pricing structures of upcoming offers will have to be enticing enough to rope in increasingly picky investors keen on seeking out the best investments in a tightening liquidity environment.