KenGen stock falls below the cash call offer price at NSE
From left: KenGen chairman Joshua Choge, Energy secretary Charles Keter, KenGen MD Albert Mugo during the launch of the firm’s rights issue at the Intercontinental, Nairobi on May 23, 2016. PHOTO | DIANA NGILA
What you need to know:
The share has slipped below the discounted rights issue price of Sh6.55, dealing a potential blow to the offer as it makes it more attractive for investors to buy the stock in the open market.
The share has fallen steadily since the Sh28.8 billion rights issue plan was announced earlier this month, closing at an average price of Sh6.35 Monday.
The drop in share price was attributed to fears of being diluted if one does not participate in the rights issue with analysts expecting the market to correct.
The KenGen share has slipped below the discounted rights issue price of Sh6.55, dealing a potential blow to the offer as it makes it more attractive for investors to buy the stock in the open market.
The share has fallen steadily since the Sh28.8 billion rights issue plan was announced earlier this month, closing at an average price of Sh6.35 Monday.
The listed power generating company begun selling 4.4 billion new shares at Sh6.55 to its existing shareholders Monday in a cash call targeting Sh28.8 billion, most of it through conversion of government debt to equity.
The power generator has to raise Sh8.6 billion in the next three weeks following government decision to take up its full entitlement by converting its loans of Sh20.1 billion equity in the power generator. The government owns 70 per cent of KenGen.
KenGen intends to use the Sh8.6 billion cash raised from the issue for capital expenditure in geothermal and wind power generation.
The drop in share price was attributed to fears of being diluted if one does not participate in the rights issue with analysts expecting the market to correct.
“What is happening in KenGen also happened to KQ but within few days the trend corrected so I expect this also to correct,” said Sterling Capital head of research, Eric Munywoki.
KQ’s rights issue in 2012 was also considered huge as it targeted to raise Sh20.6 billion.
Analysts at Dyer and Blair advised investors to buy into the rights issue indicating they expected the KenGen counter to be trading at above Sh7.66 in the next 12 months.
“We estimate a 12-month total return of 20.5 per cent, including our forecasted dividend yield of Sh3.6 per cent for the full year 2016, post-rights,” said Dyer and Blair who are also the lead sponsoring stockbrokers for the offer.
KenGen is racing to boost its capacity to meet national demand and raise its revenue.
“With the country’s power demand expected to cross the 4,000 megawatt (MW) mark by 2020, success in the future is dependent on early planning and that is why we are asking shareholders to take up their rights at this time so that we can have enough capital for expansion,” said KenGen’s chief executive Albert Mugo.
Kenya currently has an installed capacity of 1617 MW.
Among the projects lined up is the drilling programme for 140MW Olkaria VII, which is scheduled for delivery by 2020.
The company expects to complete 25MW of early generation geothermal wellhead project by June 2016, bringing the total capacity on wellhead generation to 75MW.
Investors willing to participate in the rights issue but are not shareholders can buy rights of owners who are not willing to exercise their option at the securities exchange. Shareholders who do not participate will have their ownership diluted.
Listing and commencement of trading of new shares at the NSE will take place on July, 6. The counter was the most active trading over Sh6.4 million units.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
