TransCentury changes tack, positions self for oil boom
TransCentury CEO Gachao Kiuna during the interview at his Nairobi office last week. Photo/DIANA NGILA
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More recently, the firm has divested from real estate, consumer goods, stocks, and private equity markets to concentrate on infrastructure operations where it has built massive capacity in the recent past
Dr Gachao Kiuna, chief executive officer, said TransCentury has divested from businesses that are not related to infrastructure and that the plan is to stick to the new investment route
The transformation has repositioned the company closer to India’s GMR Infrastructure Limited that focuses on airports, energy, roads, sports and urban infrastructure
He said TransCentury will not be directly involved in oil and natural gas drilling but will provide support services to the prospecting companies through its logistics and engineering divisions
TransCentury, the firm that popularised investment clubs among Kenyans, has made a strategic shift, transforming itself into an infrastructure company with an eye on the budding oil and gas industry.
The company’s chief executive, Gachao Kiuna, told the Business Daily that TransCentury, which started off as an investment club and listed at the Nairobi bourse within 15 years, is reducing its presence in other sectors to focus on the oil and gas industry where it can fully deploy its power, logistics and engineering capacity.
More recently, the firm has divested from real estate, consumer goods, stocks, and private equity markets to concentrate on infrastructure operations where it has built massive capacity in the recent past.
TransCentury is listed on the investment segment of the Nairobi bourse where it is sandwiched between Centum and Olympia Capital but has recently sought to be classified differently.
“We have tried to move to a different segment in line with our new status but have not been successful,” said Dr Kiuna. That has left analysts wondering whether to classify it as an infrastructure or investments company – raising difficulties in its valuation.
Dr Kiuna said TransCentury has divested from businesses that are not related to infrastructure and that the plan is to stick to the new investment route.
The transformation has repositioned the company closer to India’s GMR Infrastructure Limited that focuses on airports, energy, roads, sports and urban infrastructure. The latest shift is TransCentury’s third in its 16-year history.
The company was founded in 1997 as an investment club (commonly known in Kenya as chama) and rose to become a listed investment company before ultimately transforming into an engineering firm.
It began the third phase of transforming into an infrastructure company in 2010. The information memorandum for its 2011 listing by introduction at the NSE shows that it had invested in consumer and affiliated companies in addition to the three main business segments.
The then TransCentury investment company had a 10.7 per cent stake in Development Bank of Kenya, Karen Mall, funds of funds and 95 per cent stake in Chai Bora, a Tanzanian-based tea blender and packer.
It has divested from these businesses but has maintained its 64 per cent stake in East African Cables, which is also listed on the Nairobi bourse and its shareholding in Development Bank of Kenya.
The high levels of capital outlays and technical expertise required in the minerals, oil and gas industry have limited local participation giving the few able homegrown companies a wide canvas to point a profitable future.
Dr Kiuna said TransCentury will not be directly involved in oil and natural gas drilling but will provide support services to the prospecting companies through its logistics and engineering divisions.
TransCentury has a 60 per cent stake in engineering firm Civicon, which has been contracted by oil-prospecting firm Tullow Oil and Base Resources, the Australian miner at the titanium Mineral Sands project in Kwale.
“We have also participated in building four gold mines in the (Democratic Republic of) Congo,” said Dr Kiuna. Kibali, one of the mines that is owned by South African miner AngloGold Ashanti, is tipped to become the world’s second largest gold mine.
TransCentury has a 34 per cent stake in Rift Valley Railways (RVR), another subsidiary that is likely to benefit from a fledgling oil and gas industry.
RVR, which runs the Kenya-Uganda railway, rehabilitated the Tororo-Pakwach section of its network, taking it within 10 kilometres from Tullow Oil’s Block 1 in Uganda.
“The best way for anybody to get anything up to northern Uganda is through the railway,” he said. Analysts said that for TransCentury, the mineral, oil and gas work offers immediate opportunities whose fruits can only be harvested in the long run.
“Tullow Oil still has seven more basins to go, guaranteeing Civicon a lot of work in the future,” said Mr Eric Musau, a research analyst at Standard Investment Bank.
“The capital intensive nature of the industry, however, means that TransCentury may be forced to borrow or delay paying out dividends to keep pace with the work,” said Mr Musau.
TransCentury is also trying its hand in highly-specialised sectors such as power generation where it runs a 35-megawatt geothermal power plant in Menengai and a joint venture with Tanzanian firm Symbion Power.
TransCentury paid out a Sh0.40 dividend per share for the year ended 31 December 2012, from Sh1.66 in earnings per share.
Profits stood at Sh740.6 million from Sh616 million over the same period, a 20 per cent increase.
Analysts said TransCentury’s price-to-earnings ratio of (17.77) is still relatively high signaling that the share price may stay below the Sh50 introductory price in the medium time.
