Nairobi Securities Exchange (NSE)-listed Centum Investment has significant amount of cash having received several equity investments in the past two years, chief executive James Mworia said Monday refuting an analyst’s report of potential tight liquidity.
Mr Mworia was reacting to an analysis by AIB Capital, which had warned the company could face liquidity constraints going forward should some projects be delayed.
He said the report, though based on discussions with Centum’s management, had not brought out the substance of the discussions and had arrived at pre-determined conclusions.
“It is not true that we have problems with liquidity, nor have we borrowed excessively. For the Two Rivers project, we have received $139 million (Sh14 billion) in the form of equity and only $60 million (Sh6 billion) in debt. And out of this debt, we have only drawn $50 million (Sh5 billion) and it is also a 13-year loan,” said Mr Mworia.
He said even a short delay in the projects would not affect the liquidity of the company as alleged given the money the firm has already received.
The company is also yet to receive another $10 million (Sh1 billion) as part of the Sh6 billion loan from Co-operative Bank.
“We are not using short-term funds to do long-term projects so the issue of not having enough money is out of the question even if some delay is experienced in the ongoing projects. We have raised enough funds, mostly equity,” said Mr Mworia.
He said the delay of the Two Rivers project had to do with an increase in space to accommodate French-owned supermarket chain, Carrefour.
“We are on course to complete the Two Rivers by next month. The delay from the earlier date of October had to do with the fact that we had brought in Carrefour, which necessitated an increase in space from 50,000 square feet to 67,000 square feet,” said Mr Mworia.
He also disagreed with the AIB Capital’s price target of Sh54.53, noting he had bought the share at Sh65 in the belief that the value was higher than that.
“That is a gross undervaluation. I bought the share at Sh65. It was not charity, but it was because I had a good reason to think it would rise. Don’t forget I am an insider. Other insiders in the company have bought the share at more than Sh60. If anything, I would buy even more shares of the company,” said Mr Mworia.
The Centum boss said undervaluation was also apparent even by looking at the book value of the company relative to its price on the securities exchange.
As of early afternoon Monday, the share price stood at Sh42.25, which is lower than the company’s book value per share of Sh59.39.