Saturday, June 28, 2008

KCB Rights reloaded

A half year after Diamond Trust , it’s now KCB conducting a second rights issue in the span of a few years. This comes at a time when international banks raising capital are facing more scrutiny than before.

KCB are back to ask their shareholders to chip in. In June 2004 they exceeded the 2.45 billion target and this time they are set to raise 5.54 billion ($86.6 million). How else is this issue different?

What has changed?
Then ; Now
June 04 : June 08
Focus – then Kenyan expansion & rebranding ; now East African expansion, Bank ESOP
New shares 50 million ; 222.1 million [but just 22.1 million in pre-split [PS] 2007 terms]
Price 50/= ; 25/= (actually 250 PS - pre-split 25% discount each time)
Market cap 8.7 billion ; 66.4 billion
2003 PAT 486 m ; 2007 2,974 million
Ratio 1:3 ; 1:9 (1 new share for 9 owned)
Result: oversubscribed; ? (Likely to be the same)

Cost of the offer
Budget:2004 offer – 104 million ; 2008 offer – 220 million
What costs more? : CMA approval fees – up 125% (13.75m), Transaction advisor – up 103% (8.1 million), PR/advertising – up 34% (17.4 m), Printing – up 30% (15 million), Reporting accountant up 26% (3.7m)
What costs less? Legal advisor down 58% (756,000), NSE fees down 50% (250,000)

Market players changed
NSE members 17:19
In Genghis Capital (new stockbroker?), Renaissance Capital, Bob Matthews, NIC (was solid) Afrika Investment (was Ashbhu)
Out: Francis Thuo, Nyagah, Solid, Ashbhu - stockbrokers
Morphed: Faida, Kestrel Standard Suntra (from brokers to investment banks)
IPO financiers: 2004 memorandum mentioned 10 banks and two building societies offering Rights Loans ; this time no mention as share loans are a touchy subject in 2008

Shareholders: Anchor shareholders - then and now : Government of Kenya (35%:26%), NSSF (1%, 7.8%), ICDCI (4.3%, 3.5%), Sunil shah, (2.06%, 2.33%) staff pension fund (4.12%, 2.32%)

Calendar: Record date 4/6, rights start trading 23/6, last day trade rights 11/7, last date to pay for rights 18/7, new share trade 15/8, [to stave dilution, investor accounts will be credited 10 days before new shares are listed]

Investment Decision: Advice on investing in KCB rights comes from the Nairobist newsletter.


buttercookie said...

Bankelele, I always check out Bantutu and never have I ever seen this.

I'm sorry.

-Miss Cheri

MainaT said...

Banks: I rarely participate in rights since the NIC one. Why? There are no allocation rules if the right is oversubscribed and if they are, they are changed after close. NIC did the smartest rights issue ever. For every share held after the rights, shareholders would get a bonus issue. Funnily enough, it was oversubscribed. I got like a 1/10 of my subscription.

coldtusker said...

MainaT: NIC's allocation was flawed in that the criteria heavily favoured the ndegwas...

Anonymous said...

I still don't understand how the rights issue works. This is my first one. would anybody care to enlighten me? I already read Nairobist's newsletter. In my case, how I understood it from Nairobist, I have 8000 kcb share. Meaning I have around 888 rights shares. I am planing to let it laps, how am I going to benefit and by how much? Banks if you can help...

bankelele said...

Buttercookie; K thanks for checking in

MainaT: allocation rules are there, and defined for existing shareholders, if you just pay for your allocation. I have got my full share for D-Trust and KCB each time even though they were over-subscribed

Anon: you can pay for you 888 new shares, trade the options at the NSE this week, or just ignore the PAL

just what? said...

any word on who is behind the new broker Genghis? is there anything special on offer?


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