Wait for KenGen price correction

KenGen Rights Issue: KenGen last week announced that it had fallen short of the Sh28.7 billion targeted in its just-concluded rights issue. The power generating company reported that it had taken in Sh26.4 billion in the rights issue that made history as the biggest ever held on the local bourse.

This represented a 92 per cent rights uptake, of which the national government took up its full rights for its 70 per cent stake in the company. The 8 per cent remaining rights amounted to about 351.2 million shares. On the other hand, institutional investors took up additional new shares with an investment worth Sh3.6 billion in the issue.

The power firm was selling 4.4 billion new shares at Sh6.55 per share to its existing shareholders at a ratio of two for each unit held. The power firm is likely to use close to Sh20 billion to settle its most costly debts and about Sh6 billion in capital expenditure.

On Friday, KenGen opened the market at Sh6.80 per share from Thursday’s closing average price of Sh6.55 which had a traded volume of 301,100 shares. The counter nearly touched the Sh7 price, only to shy away at Sh6.95 during the day’s intra-trading sessions. However, this may not be the best time for investors to take position.

According to Mr Eric Munywoki, a research analyst at Sterling Capital Limited, investors should wait for the new rights to be listed and for the price correction to take place before jumping in to avoid a dilution effect.

“There is a likelihood that the dilution might be significant once trading commences, and investors should wait and see how far it will go before jumping in,” he says. Over the past one year, KenGen has traded at a low of Sh5.40 and touched a high of Sh11 per share.

READ: KenGen raises Sh26.4 billion in the largest rights issue at Nairobi bourse

READ: State uptake of KenGen rights to cut finance cost

READ: KenGen share picks up steam on increasing local investor appetite

Nation Media Group: On Thursday last week, the Nation Media Group (NMG) announced a restructuring move for its broadcast division. The restructuring strategy saw the consolidation of NTV and QTV into one television station under the NTV brand and the scaling down of the group’s radio business in Kenya and Rwanda which affected QFM, Nation FM in Kenya and KFM in Rwanda.

According to the NMG CEO Joe Muganda, the move is aimed at ensuring an efficient, relevant and targeted dissemination of information to consumers.

According to Mr Robert Ochieng’ a researcher on securities markets, although the strategic shift towards digital and mobile content may result in staff reduction, it is a good move in line with the changing market dynamics.

“The dynamics affecting local media industry are not constrained to Kenya alone,” says Ochieng’.

“However, there is still a lot to be tapped in the growing broadcast industry especially in monetised digital media.” He further notes that NMG shareholders need to accumulate the stock.

In its last financial year, NMG posted a full year net earnings of Sh2.2 billion from Sh2.5 billion reported the previous year. This represented a drop of 9.7 per cent.

However, the company maintained its dividend payout of Sh10 per share, retaining its position as a dividend-oriented counter on the NSE.
During this financial year, NMG’s assets increased by 6.3 per cent to Sh12.7 billion. NMG’s main profit contributor continues to be its newspaper division which is credited with over 80 per cent of the company’s operating profits.

On Friday, NMG opened the securities market at Sh150 per share, and recorded a daily range of between Sh149 per share and Sh151 per share. This was the same average closing price that the stock recorded on Thursday from a traded volume of 5,200 shares.

Over the past one year, the counter has traded at a high of Sh219 per share and a low of Sh130 per share. The stock has a BETA – which measures a stock’s volatility or risk in comparison to the whole market – of 0.96 and a par value of 5.