Rank: Elder Joined: 7/22/2009 Posts: 7,740
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stocksmaster wrote:MaichBlack wrote:VituVingiSana wrote:MaichBlack wrote:stocksmaster wrote:stocksmaster wrote:littledove wrote:https://ntvkenya.co.ke/news/treasury-to-raise-sh100-billion-from-selling-kenya-pipeline/?utm_source=twitter&utm_medium=NTV+SocialsThe National Treasury expects to raise approximately Sh100 billion from the privatisation of the Kenya Pipeline Company (KPC) shares through an initial public offering at the Nairobi Securities Exchange. The Treasury says the proceeds from the KPC sale will be used to fund priority public services and infrastructure. A Sessional Paper on the Privatisation of Kenya Pipeline Company through an Initial Public Offering (IPO), tabled in the National Assembly, shows that the proceeds of the sale will enable the government to raise funds budgeted for in 2025/26, to implement economic and social objectives. ........................ “The company is wholly owned by the government of Kenya, with 99.9 percent shareholding held by the National Treasury and about 0.1 percent by the Ministry of Energy and Petroleum.” The KPC maintains an extensive pipeline network spanning 1,342 kilometres, and in the financial year 2023/24, reported Sh35.4 billion in revenue and a Profit After Tax of Sh6.9 billion, contributing dividends to the National Treasury. The maths is not adding up. Let's do some quick calculations: What we know is that the GoK will list 65% of KPC shares. The net profit for 2024 for KPC was Ksh 6.9bn. If we apportion 65% of this net profit to the public shares to be sold, that adds up to about 4.5bn. If the target is truly to raise 100bn from the 65% stake, that means the IPO share price will be at a P/E of over 22! (Price of 100bn/Attributable net profit of 4.5bn). KenGen for comparison is trading at a trailing P/E of below 7 making the potential KPC IPO offer share price three times more expensive. If the KPC offer is to be sold at same market metrics as Kengen (Price per earnings of about 7), then the realistic cash to be generated for a 65% sale of KPC based on an annual net profit of about Ksh 7Bn would be 1/3rd of that 100bn....about Ksh 30-33bn. Happy Hunting With KPC IPO details now out, it seems my calculations were spot on. The IPO is being offered at a P/E of almost 22 {Ksh 9÷0.4122} so as to generate Ksh 100bn. Thats a crazy valuation when compared to Kengen (P/E of 6) and KPLC (P/E of 1) being the other GoK energy stocks they will share an NSE category. I wonder whether the transaction advisors are oblivious of the market? Wanjiku will buy based on hype but am curious about institutional and high net worth investors. An interesting IPO but will seat out of this one as I wait it post market at my target price of Ksh 2.50. Happy Hunting Thanks @Stockmaster for you analysis. Interesting times we are living in. I am also wondering if there is more than meets the eye here! My trust for this government is at an all time low. As you clearly point out, the transaction advisors cannot be that clueless!!! Is someone trying to grab KPC by for example doing everything to ensure there is a massive under subscription and then the government being later "forced" to do a private placement! After all, the public was given a chance to buy the shares and "they refused" to buy them and the government still needs/wants to raise the cash!!! Or is someone just trying to shaft Kenyans!!?? But it will not be easy to shaft institutional investors and gullible retail investors cannot take up 100B worth of shares! (informed ones will sit it out) KenGen had a "private placement" of sorts to PIC (SA). And if the public does not buy at 9/- then let someone else buy at 9/-. If anything, the "Buyer of Last Resort" [your someone trying to grab KPC] makes no sense since they could apply for the shares during the IPO as well. I am thinking of a situation where the private placement is done later to a "strategic investor" at a huge discount and all sorts of excuses given including the lower uptake during the IPO. The uptake may actually surprise us since business wise it would be very strategic for OMCs to control KPC.With KPC having acquired Kenya Petroleum Refineries Ltd assets (tanks and over 250 acres land most of it near port), and having negligible debt in its balance sheet, a strategic long term investor could comfortably acquire the shares at current pricing and leverage the balance sheet for debt to grow the current regional oil pipeline near monopoly business while diversifying to other potential related ventures e.g LPG energy generation. This whoever applies mainly to a large investor that can take a significant stake to have board influence in actualising the long term full potential of the company. As such,this IPO is tailored and priced for long term strategic investors and OMCs and not Wanjiku and other short term investors. Happy Hunting I agree with you on that. But only 15% is reserved for all OMCs combined. But I suspect there is a clause that allows them to take up unallocated shares in other categories if there is an oversubscription in theirs and under subscription in others. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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