Tuesday, July 21, 2009

Centum 2009 AGM

The Centum 2009 shareholders annual general meeting was held on Friday July 17 2009. Their last meeting I attended was 1½ years ago in February 2008 when ICDCI (changed its name) and became Centum. a quick Google search reveals other companies around the world with a similar name. So shareholders were right when they pushed for a more authentic, African name

AGM recap: From reading the minutes of the last shareholder meeting seems there was quite a bit of drama at the company’s last AGM in January where the independence of directors was questioned, and there were some interesting director elections whos resulted were polled and motions by some shareholders to remove two directors - (Chairman James Muguiyi and businessman Chris Kirubi) flopped. Most media reports however dealt with the delayed AGM and the payment of dividends at the door, but the best recap of that comes from the Nation

Bored this time: This was one of the longest AGM’s I have been to in a while. The Chairman and the CEO of the company each give long speeches about the company, that easily took up almost 2 hours - giving views on the performance of the company and future outlook as relates to the corporate bond they are about to launch.

Centum Performance their investment book is worth 6.5 billion (($84 million) down from 8.1 billion the year before. Reasons for decline were gains on disposal totaling 311 million, and further impairment of Rift Valley Railways (RVR) shares 271 million.
- The portfolio is consists of : 25% is KCB shares, General Motors East Africa 25%, Insurance 19%, 4% is publishing (a 35% stake in Longhorn), Beverages is 24% (includes shares in EABL, and several coca cola franchises), Services is 4% (includes 0.1% of Safaricom, and shares in NAS, and RVR), and 5% is a newly acquired (23% stake) of Carbacid . some values are KCB Kshs. 1.84 billion, GM 978 million, UAP 877 million, Nairobi Bottlers 660 million, KWAL 263 million, EABL 426 million, Mt. Kenya Bottlers 209 million
- Target is to have administrative costs at less than 2.5% of their assets. 2009 was 123 million (1.5%) and 2008 (136 million = ~1.6%), which includes cost of staff, running company, shareholder costs etc. striking a blow to companies that say public shareholders are expensive to administer
- On RVR: board maintains that it is still good company, had bad management. Once new deals are signed, new technical partners and this will see $50 million invested in the company. Fundamentals are still good, lots of foreign investor interest on the company, and it will be wrong to walk away when the value is down

Corporate Bond: Centum will be launching a corporate bond to raise Kshs 2 billion (~$26 million), reasons given include
- It’s the right rime, Safaricom and Kengen about to launch, while a recent bond from CFCstanbic bank was over-subscribed. After prospectus and approvals, it will be marketed to pension funds, institutions, insurance companies, even shareholders can subscribe
- Current borrowing costs at 170 million out of 6.5 billon assets are very manageable. Their dividend flows are not consistent, so they sometime need overdrafts, but can’t grow the business on overdraft. The Bond will add some long term funds to balance sheet
- They have a pipeline of investments lined up, and what is a bad market for others is a good time for Centum to buy into companies. Funds will be invested 60 – 70% in private companies, 20-30% in listed companies and 0.15% in real estate. They already signed the deal for Carbacid for about Kshs. 400 million that was done through Rasimu Limited, a new wholly owned subsidiary
- Bond is better than bank debt, cheaper, long term, more flexible. It will cost 9.5% to 12.5% per year

Image Centum plans to expand into Africa from Kenya and their vision is to be Africa’s foremost investment channel. Chairman mentioned that their name brand is important, and regretted that bad press had seen the share price dip

Voting: The voting was done by ballot, and the auditors will tally the results. So at the meeting, motions in the agenda were proposed and seconded, with shareholders asked to mark ballot forms and leave them outside after meeting for votes to be tallied. With the new registrars CRS, voting by this method could become the norm, especially on controversial votes, where shareholders numbers at the annual general meeting can be canceled out by real tally of proxy votes. That was the case at the January meeting, where the 1,536 shareholder attendees (with 258 proxies) tallied yielded just 1% in the re-election the directors.


MainaT said...

Tx for the update dude. Touch button issues for Centum are RVR (where are they going to get the capital needed to start generating enough returns). Its good its written off some of the costs so exit becomes easier. The hot button issues is NSE. Currently fairly directionless. Which is a problem. KCB as an example-average price lets say is mid-20s as most shares were bought before 08. Thus you need NSE at 5,000 to be truly green.

I'm surprised Centum doesn't have nay international exposure for example to BRIC nations or even Ghana stocks.

Mashatall said...

The allocation to real estate is not that much considering how capital intensive real estate is, unless they intend to use a lot of leverage. My take is that what centum needs is visionary management right now, that will steer the investment portfolio towards growth areas within Africa. Locally i would be more excited if they were to take up stakes in ICT, content production companies and utility companies since those are the key sectors that will generate good returns. Hope they can revive GTV and kill DSTV's monopoly and also bring in more local content which is cheaper to procure than foreign content.

bankelele said...

MainaT: I think new shareholders will and centum will put in about 5 - 10% of the new funds required
- they defended their listed investments saying they needed to have a portion of portfolio in fairly liquid companies
- directors don't seem to have foreign expertise to make such investments

Mashatall: i don't expect themn to be 100% in a real estate project, maybe 10 - 20% in mall, or housing complex
- ICT would also be nice, and what a great idea yo uhave there to -revive GTV (I wonder whats going to happen, but i also wonder if kenyans will take an anti-DSTV gamble again after that)


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