Hi-Lo: You have to lay out the math for me... that you figure without a Rights the price would drop to 65/-... makes no sense to me...

Kausha: How do you come up with the 65/-?

Ceteris Paribus for PBT...

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

VVS

Divide the 87% of the 15.9B pref amounts by the 140 / share value and you get about 100m new shares KPLC must create and give gava to retire this 'debt'. What does it do to the company's market value...nothing since KPLC was not even servicing the prefs yet they already used up the money. The 100m shares rank pari passu with the 79m in issue. We now have 179m share of KPLC available. KPLC's market cap is about 12B now. The NAV including the pref amounts remains 27B much higher than its market value. Obviously one would argue grossly undervalued at the current price. Now divide the 12B by the 179m shares you get a value 67/share. Unless you are telling me the current price of 160 already priced in this then.....KQ also trades below its balance sheet size and NAV. Debt levels could be part of the reason .

SM

It's a fair price,utilities all over the world trade at very low multiples. Their growth is in most instances in step with GDP growth and most of these companies tend to pile lots of debt to drive production and or distribution. Their dividend payout is normally constrained by debt service and the modest top line growth. Only good thing about this conversion is that KPLC will have s*** loads of gearing capacity. My only worry is there are no good cash generating projects on KPLC's table...the Rural electrification is a loss making event for them and retail projects are few,very kidogo housing development taking place. No great industries coming as well. Production capacity is also constrained - kengen.

Kausha - The NAV is calculated using Ordinary Shareholders Funds / # of Ordinary shares in Issue approx 80mn.

In the current situation we deduct the preferred share capital (KShs15.9bn) from shareholder capital since those funds are GoK's not the Ordinary Shareholders.

BUT when you 'convert' the pref to ordinary you 'release/re-categorize' the preferred Share Capital to Ordinary Share Capital (incl reserves+share premium). So your NAV does rise by 14,000,000,000 (14bn) assuming 140/- x 100mn shares.

@Kausha - You are mistaken in dividing current NAV by 180mn shares. You should take current NAV (allocated to Ordinary Shares) then add KShs 14bn. Take the Sum & divide by 180mn shares.

At 65/- per share... I would BUY out entire KPLC... even if I had to borrow... LOL... if anyone wud lend to me.

KPLC made 40/- EPS (before deducting pref dividends) which is KShs 3.225bn.

KShs 3,225,000,000/180,000,000 shares = 18/-

160/18 = PER of 8.9 which is very attractive. Utilities with properly structured rate plans make decent (not super profits) thus a low P/E but a steady growth potential.

Someone indicated that utlities grow with GDP. True for developed economies but Kenya has a vast untapped demand (how to service it economically is the challenge) in the slums + rural areas.

KPLC's major losses are from theft. Includes theft of transformers,cables,oil (low value item but destroys the transformer),corruption (low-level & possibly high-level) & illegal (mungiki-style) tapping of electricity.

A 1% reduction in system losses can boost KPLC profits substantially but this requires unqualified government/police support. Last year,KPLC hit kibera where 9/10 (as reported) were illegal connections. The police were involved since the mungiki were involved.

Bottomline: A 'truer' or intrinsic price/value would be 200/- not 140 or 160.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

OK... after all the calculations.. I will pick up some KPLC @ 160... why?

1) Foreigners have been buying most of the KPLC over the past few days... well,since the announcement. I think that the effective float will be reduced on KPLC.

2) I stand by my calculations. Even with 100mn more shares,the EPS will be 18/- if KPLC repeats 3,225,000,000 PAT in 2010. The P/E is less than 9.

3) I assume (yep!) the dividend will remain 8/- thus a div yield of 5%. Not great but to 'match' KenGen's bond all I need is 7.5% increase in the price.

4) To account for buy & sell commissions + 5% w/tax... I assume (yep! that again) that KPLC will raise my dividend ever so slightly as well as increase its profits.

5) I also want to position myself for the Rights. We do not have the details but...

Now... before I put in my order... please tell me the flaws!!! And please use numbers/figures...

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB