Billionaire Kibunga Kimani takes 6.8pc stake in Centum

John Kibunga Kimani. FILE PHOTO | POOL

Billionaire investor John Kibunga Kimani has bought an additional 10.8 million shares of Centum Investment Company Plc currently worth Sh90.7 million, raising his stake in the firm that remains undervalued in the market.

Regulatory filings show that Dr Kimani raised his holdings in the investment firm to 45.5 million shares in December 2023, up from 34.6 million in March 2023. This saw his stake rise from 5.21 percent to a new high of 6.84 percent, ranking him third after the estate of the late businessman Chris Kirubi (30.82 percent) and the State-owned Kenya Development Corporation (22.96 percent).

Dr Kimani, a long-term investor on the Nairobi Securities Exchange (NSE), has been buying shares of Centum and other firms, including Safaricom and agricultural firm Kakuzi. His latest purchase of Centum occurred amid the stock’s decline to record lows, plunging to Sh7.6 on May 22, 2023, before rising to the current Sh8.34.

Centum’s share price has dropped substantially from a peak of Sh84.5 recorded on September 23, 2014 when the market reacted positively to news that the company had won the contract to build a $2 billion (Sh327 billion at current exchange rates) coal-fired power plant in Lamu.

The proposed project did not proceed in the wake of opposition from environmental activists and financiers who developed cold feet.

The share price subsequently declined below the company’s tangible assets, with management switching from the previous debt-fuelled expansion to a more conservative strategy partly anchored by the substantial holding of liquid and cash-generating assets, including government bonds.

In the half year ended September 2023, Centum’s net asset value per share stood at Sh62.82. This indicates that the company’s share price is trading at an 86.7 percent discount.

Centum had bought back a cumulative six million units of its own shares as of November 20, 2023 as part of its efforts to close the gap between its share price and net assets.

Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting the share price besides raising the stakes of continuing shareholders.

The investment firm has been making losses in recent years but has nevertheless maintained dividend payouts using cash generated from the marketable securities portfolio.

Centum narrowed its net loss by two-thirds to Sh426.4 million in the half year ended September, helped by a recovery in its real estate business.

The company had posted a larger net loss of Sh1.29 billion in a similar period a year earlier.

Its property business comprising Centum Real Estate subsidiary made a profit of Sh518.8 million, reversing a loss of Sh267.9 million.

The Two Rivers Development project also narrowed its loss from Sh984.7 million to Sh777.3 million while the investment operations moved to a profit of Sh8.3 million from a loss of Sh344.7 million. Centum’s financial services operation, comprising Sidian Bank, saw its profit fall to Sh201.7 million from Sh385.2 million.

Its trading business, including Longhorn Publishers, posted a loss of Sh113.7 million, reversing a profit of Sh42.6 million. The company, which invests in diverse sectors, organises its operations into five segments.

The loss reported in the review period captures the performance of all its subsidiaries and joint ventures.

At the holding company level, representing only administrative costs and the performance of its portfolio of securities such as bonds, Centum reported a 487 percent surge in net profit to Sh1.4 billion. This was up from Sh244 million the year before.

The firm said its operating and administrative expenses grew 18 percent to Sh300.3 million, reflecting the impact of rising inflation and the implementation of the Finance Act in the period.

Centum cut its borrowings at the holding company level, a move that saw finance costs fall to Sh142.1 million from Sh214 million.

It closed the period with borrowings of Sh2.1 billion.

The company earlier said it plans to become a debt-free holding company by next month.

It has gradually reduced its borrowings in recent years in a strategy it says is aimed at eliminating risks linked to indebtedness in an environment of rising interest rates and weakening shilling.

The company says its subsidiaries, joint ventures and associates will continue to carry debt based on their capacity. The strategy seeks to control the risk of borrowing at each operating unit.

Across the group, borrowings declined to Sh17.7 billion from Sh19.6 billion. The debt has dropped further following the recent repayment of a Sh2.95 billion bond by Centum Re, the property subsidiary.

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