NAIROBI, Kenya, May 12 – Centum Investment has disclosed plans to raise a five-year, Sh2 billion bond from the debt market.
Managing Director James Mworia said on Tuesday that they had appointed transaction advisers and that they were currently working on the offering documents which would be presented to the Capital Market Authority in the next three months.
“We have ambitious plans and see a window of opportunities that we want to take advantage of. One of the ways we propose to raise money is by raising long-term debt capital,” he told an investor briefing.
“Our balance sheet is largely un-leveraged, we have a very strong cash flow stream and we hope our bond will come into the market soon,” he continued and hinted that once the funds have been fully utilised they would go back to the market to source for more.
He explained that the funds raised from this offer would be used in various projects such as the acquisition of influential stakes in both listed and non-listed companies in various countries and sectors as well as investment in real estate.
“We want to be a more proactive investor and employ private equity-value creation techniques that will generate more value for us and our shareholders,” he said adding that they would put in between Sh160 million and Sh800 million in this venture.
In the real estate business, Centum hinted that together with mortgage providers, it would develop a structured equity instrument that would enable them to take advantage of the demand for properties and increasing purchasing power to exploit the potential in the sector. In all these investments, they target returns of over 25 percent.
“We want to raise private equity and real estate funds in the next 24 months in which we will invest in and also invite other investors to put in their money alongside us but we will manage it,” the MD said while boasting of Centum’s experience in fund management.
He added that they were in the process of evaluating their portfolio to identify “mature” opportunities where the ‘incremental returns are low’ and where they are markets for them to exit.
Mr Mworia said these decisions had largely been informed by the opportunities such as the attractive buying environment that are being presented by the challenging economic times.
“Market valuations are coming down not because of the (firms’ fundamentals) or other factors that are not related to their performance but because of other intrinsic factors and that’s where the opportunities are,” he emphasised.
During the function, a 64 percent decline in its profit after tax to Sh313 million for the year ended March 2009 was reported and the board of directors did not recommend any dividend payout for their shareholders.
Last month, the company had issued a profit warning saying it might register a 70 to 80 percent drop in its profits for the year (ended March 31) mainly due to the bearish environment at the stock market that had reduced their selling activities.
Mr Mworia also sought to assure shareholders about their investment in the Kenya-Uganda Railway concessionaire, Rift Valley Railways (RVR) where the company has a 10 percent stake.
RVR is undergoing a recapitalisation program, where it is seeking to raise $50 billion but the MD revealed that Centum would not be participating in the plan.
”In line with the International Financial Reporting Standards, we are required to review the value of our investments annually and we wrote down the value in RVR by 84 percent to a value that is reflective of what incoming investors will be investing into the concessionaire this year,” he explained.
This impairment also went into their Profit and Loss Account and therefore did contribute to the firm’s poor performance.
Mr Mworia also confirmed reports have been rife about the need for the two governments to amend the concession agreement that would see new lead investors come on board and inject the much needed capital.
Terming it as a ‘routine amendment’, the MD said it would facilitate a recapitalisation of the business that has been under performing since the concessionaires took over three years ago.