The key will be in the next few weeks... If foreign funds want in they can:

1) Buy shares today to get guaranteed Rights
2) Buy Rights at a Premium
3) Apply for Additional Shares

Funds like certainty so I expect (1) + (2) to happen which reduces shares available for (3). Kenyan institutions like Pension Funds might jump in as well. It is not easy to deploy KShs 100mn into many shares without moving the market whereas this is 'easy' to do for them at a cost they can calculate beforehand.

@ 2012: The conversion of preference shares to ordinary shares is long overdue. KPLC has been paying a dividend of almost 50% of total profits; but the ordinary shareholders have only been receiving (taking latest results as an example) a dividend Ksh 8 out of Ksh 47 made per share (the preference shares have been receiving 2/3rds of all dividends paid).

The upcoming rights issue and the conversion of the pref shares to ordinary has introduced major new dynamics on the share.

The almost 50% dilutional effect by the conversion was anticipated. However, the further massive 40% dilutional effect after the conversion was yet to be factored into the share price and this will happen over the next 2-3 weeks as the timetable of events becomes available.

Considering that after the conversion, split and rights the EPS = KSH 2.14, the current price is at a P/E of 13.7.

I anticipate the rights will be offered at a P/E of about 10 hence a price of about KSH 21. With almost 70% of the rights belonging to the GOK and thus not being taken, the issue starts resembling the KCB rights only this is at a larger scale in that the free floating rights will need a Ksh 7B mop. It therefore means that as the rights approach, it is very possible that the share price will tend towards the rights price with only a 2-3 Ksh premium (just like the KCB rights issue). I estimate a post split pre rights price of below Ksh 25 (below Ksh 200 at current pre-split prices).

The only advantage of having the share now is to qualify for the approximately 2:5.1 rights. However, the cost of the rights in the market in this situation may not exceed Ksh 2. As such,it doesn't make much sense to purchase the share at any price above Ksh 185 currently (post split Ksh 23).At worst, buy the rights at the market for about Ksh 2 and pay the Ksh 21 for a total cost of Ksh 23. At best, just buy a few rights and apply for additional rights at Ksh 21 for a total cost of approx. Ksh 21 per share.

After the rights, I anticipate the share will trade at a P/E of at least 12-13 (price of Ksh 25-28). The Dividends per share (2009/2010 results) will be about Ksh 1.10 (add all dividends given to pref and ord. shares and divide by all the ord. shares post split and post rights). The dividend yield will actually be very enticing especially if the interim dividend and the almost 50% payment of net profit as dividend is maintained.

This is however still based on assumption and will get clearer once the rights price and timetable of events is known.

Happy hunting.

Wait...so I dont get it...Guru...u dont like the stock anymore??

Ah...makes sense....

@sheep i sooo disagree with you there... many african public utilities are in loss territory because they are riddled with corruption and inefficiencies...

KPLC has been doing its best to remove all its ineficiencies and i must say its doing a commendable job and its expanding... plus its one of the only listed public utilities in africa and therefore has responsiblity to its shareholders....

Note that it made a 19% increase in profits with no increase in tariffs hence showing their increased efficiency and product diversification..

So 10 years from now when the economy has expanded by i dont know what you'll tell me where KPLC will be trading...

@youcant i guess you're right... we need to elect a president whose sole aim isnt to increase popularity (Raila)... otherwise Kenol, mumias, unga, Kengen, KPLC will all be in serious S##t...

But about the 50% ownership i am EXTREMELY bullish on.... at the moment KPLC gets loans at between 10-15% interest rates with the new ownnership structure they can get loans at between 0.5-4.5% interest...

please tell me you know what this will do to their bottom line....

KPLC does not borrow at 10-15% unless it is a LOCAL loan in KES...

KPLC has low leverage [ironically coz no-one wanted to lend to it since it had financial problems a few years ago]...

The 'cheap' loans are generally in forex & are a double-edged sword [see EAPC's Yen Loans]. They may be 'cheap' but the KES has been getting weaker against many of these loans.

Compare KES vs US$, Euro, £, Yen, etc over tha past 10 years...

Please expound on your math. I only own a paltry 100 shares and I am trying to figure out how I will participate in the rights

Many thanks Stockmaster for your intersting post. When the announcement came in for KPLC rights, I quickly jumped in and bought 100 shares. My thinking was that I would apply for more rights given the government is renouncing theirs. If as you said the price is will be 21 or thereabouts (p/e of 10), it will be exciting to purchase more rights. I expect KPLC to grow in tandem with the economy, possibly exceeding GDP by almost twice in the next 10-15 years, and thereafter will grow at similar pace. This is a stock that will measure the countries Vision 2030 success rate and so it will be exciting.

What is your prognosis on the rights uptake? Will it go the KCB way?

If KPLC goes for KShs 10bn (or less)... it will be oversubscribed...

1) KCB was limping from bad memories... the earlier 25/- Rights Issue [and price had dropped to 18/-]. Since then over-subscriptions for HFCK Bond, SCBK (well, I am confident), TPSEA...

2) Foreign interest has spiked in Kenya. Huge funds can/will come in. Easier for them to buy in bulk...

3) If HFCK can raise 7bn paying 8.5% as interest... KPLC dividend yield at 3.5%+ is very good. The 5% growth in the profits (translated to the share price) is attainable as more consumers come online...