Man about town

How Centum’s top deal maker makes his pick

centum

Centum chief executive James Mworia. FILE PHOTO | NMG

If Kenny Rogers met James Mworia instead of his gambler he would still have inspired the track on knowing when to stake and when to walk away.

Mr Mworia thinks and talks in a structured way, weighs all options before investing a bet and does not regret leaving money on the table, because, every hand is a winner, and every hand is a loser.

When it comes to investing he says he is agnostic, his philosophy is driven by objectivity and discipline that helps him stay focused despite all the noise from the public gallery who question all his choices.

He says if you look at his choices as an outsider it may not appear straightforward forward but when you have the full information you would probably then make the same decision.

“You see what happens with investment decisions, you have a reason going in, you see where the market is going, you look at the price you can extract and you make a decision, am I better off staying than leaving,” Mr Mworia said.

He said Centum has sold some of its prized portfolios to protect their value and had foreseen a downturn in the market as early as 2018.

ALSO READ: Centum sells Sidian Bank for Sh4.3bn to Nigerian lender

The company had built a large debt-funded portfolio whose value was very sensitive to a downturn in the market.

They had to decide whether to take their winnings and lock their gains or stay on the table and take the chance they were wrong and the market would lift.

One place he had made a lot of value is the bottlers when they got a buyer who was willing to buy at 10.5 times Ebitda or earnings before interest, taxes, depreciation, and amortisation.

He said the risk was selling and the market goes to 12 times then they miss out on that extra premium.

“But if you look at that time, because we are benchmarking with breweries which were at 10.65 EV Ebitda, if you look at March this year it is around six times. So it is true what we feared was going to happen happened. So had we stayed, the movement from 10.5 to six is almost 40 percent of the value of the company which can now wipe out the profits,” he said.

Mr Mworia said some of the decisions he has made are risk mitigation because having created value you do not want to see it eroded.

For Sidian, the regulatory environment had changed and returns were based on a scale which would have required outsized investment for uncertain returns.

At Platinum Credit, his concern was what happens to the margins if there is a regulation on pricing because they were borrowing at around 16 percent and on-lending at a high rate.

“You better off exiting now at a certain value than taking that regulatory risk, remember we had already been bitten in Sidian with that rate cap so for us it was not a hypothetical risk,” he said.

Mr Mworia has learned the ropes through time, which has given him insights into how to make sound predictions.

ALSO READ: Centum's Two Rivers subsidiary to sell stake by April

He says he is selling down his portfolio but building his war chest in preparation for when the market will rise again.

“We started going in a dip in 2015, but it will come back. Even in 2000 and 2001, everyone used to think this thing will not end and I was working here. The prices were so low and there was no future but they will come back eventually. These things are caused by global factors and the rest so it will come back,” he said.

Mr Mworia said the good thing about being in the market long is that he has seen slumps and peaks, he was in the market in 1999, 2000, and 2001 we were in this kind of market where prices collapsed, prices were very low and the shares Centum bought at that time are what helped it build capital when the markets rose.

He said when he joined Centum in 2001, he used to do portfolio status reports where he witnessed the company with just a billion in assets going into the market, taking positions in blue-chip companies.

When the markets recovered from around 2003 to 2005, it moved Centum to around Sh6 billion come 2009.

ALSO READ: Centum shuts down services unit, lays off staff

Then in 2009 after the global financial crisis, we had another dip, Centum bought some blue chips.

“I remember I was here when we bought Carbacid, Tanzania breweries we were looking across the continent. We made almost billions when the market recovered. That is the money we used to fund this phase of growth,” he said.

He said the trick is to maintain your firepower until when the market is just starting to climb

“So I see a lot of buying opportunities but one has to be disciplined as to the timing because you do not have to catch the market at the very bottom, what I have learned is you just wait for it to start picking and you go in the stock market,” he said.

In the interim, you can preserve capital in the fixed income securities and earn a yield.

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