for me am bullish about the rights ...remember only 50% of the right will be on offer for the public and the other 50% are already guaranteed to be taken up but for loans for a rights ..i really donot like that idea ..

I do agree on your point regarding loans for the rights, reminds me of the Safaricom IPO. Just the fact that they got two of the shareholders in GoK and KLM to commit themselves to it should immediately have a bullish tag on it. We are bullish about it but why isn't the market indicating that?

@deal - what is your buy on dips level? 17, 15, 12? The pilot bailed out @30 na bado rights & we are below 20 feet!?

I posted the piece below on 7th of September 2011 (KQ Capital call - Its a rights issue) when it was 1st announced that a rights issue was to happen:

"KQ currently with about 461.7M issued shares, to raise Ksh 22B would mean each share bringing about Ksh 48 during the rights.

One way to do this would be to create an additional (461.7 X 2)= 924M shares. This would then be issued as a 2:1 rights offer (each existing share eligible for 2 rights shares) at a price of about Ksh 24 per share.

The problem here is that the dilutional effect on EPS that will result from such a rights issue would be massive! This would possibly push the post rights share price to a single digit figure.

I therefore forsee a mixed rights and bonus issue to cushion the shareholders against value erosion.

But it would be prudent to avoid this share in the short term until the Capital call details are clear.

Happy hunting."

I still stand by my observations above.

It would be prudent to sit out until the rights details are clear. The raising of Ksh 22B in the current market (put it at Ksh 11B if the two principal share holders agree to take up all their rights)is not easy.

The collapse of the KQ share price makes matters worse , as the rights must be at a discount to the prevailing share price (Say a price of Ksh 15). Reducing the rights price forces an increase in the number of shares to be issued (3:1 rights issue with creation of additional 462x3 = 1386M Shares), further worsening the dilutional effect to existing shares EPS and Dividend yield.

My advice would be to shelve the rights issue until the 1st Quarter of 2013 when the market should be experiencing a recovery (assuming 2012 December elections)

Happy Hunting.

My gut feeling is a low of Ksh 15.......at this price, the P/E will be about 2 and a dividend yield of 10%. Any price below that would be a steal which many investors would find it hard to ignore.

Happy Hunting.