KenGen share picks up steam on increasing local investor appetite
KenGen managing director Albert Mugo during the release of half-year results in February. PHOTO | DIANA NGILA
Kenya Electricity Generating Company (KenGen) share has picked up steam as investor appetite for the stock increased in the second week of trading the new stock.
The KenGen counter has traded a total of 53.3 million shares in the two weeks since the rights issue opened in May 23.
“From a trading perspective I think we saw a bit of weakness in the first days but it has picked up in the last few days and I think the offer is likely to be taken up,” Eric Musau, an analyst at Standard Investment Bank (SIB) said.
Mr Musau said the government’s decision to take up its principal shares by converting Sh20.2 billion debt into shares has bolstered KenGen’s rights issue by offloading the pressure to raise the Sh28.8 billion to help finance 720 megawatts of new production capacity over the next four years.
“For any transaction, the anchor shareholder taking up their shareholding is always important as is the case for KenGen as you can imagine a company selling shares and the anchor shareholder not taking up their share, that is always a negative,” he said.
Mr Musau said that initially, the offer attracted more foreign investors but recent trading had seen heightened interests from local investors which may indicate current shareholder bid to defend their positions.
“The interest is a combination of both local as well as foreign investors. Locals were quiet initially but it looks like they are also coming up but foreign investors have been quite keen,” Mr Musau said.
The shareholders will have up to June 10, 2016 to exercise their right of two new ordinary shares for every one ordinary share held in the company’s register as at May 16.
AIB Capital recommended that the shareholders could reap better returns from the potential of doubling its share price according to their estimates.
“We recommend shareholders to take up their rights and invest more in KenGen due to the earnings growth and upside potential the company has. Based on our target price of 15.10, the stock has an upside potential of over 100 per cent,” AIB Capital said.
KenGen is offering a total of 4,396,722,912 new ordinary shares at a price of Sh6.55 per share to raise Sh29 billion for business expansion. Mr Musau said there is a sense that the shares would receive a positive push from the dividend yield.
He also said the energy firm’s management has played a proactive role in ensuring the success of the offer.
“The management has also been quite proactive; they have met investors in Nairobi, the different fund managers as well as across the country in roadshows in Mombasa, Nakuru, Eldoret.
“So I think that effort as well as international trips have also played an important role in seeing the type of interest that we have been seeing,” Mr Musau said.
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