@ 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.

Bw.cnn -

I do NOT know how many shares will be allocated to GoK (though we know the 'value' approx 13.8bn worth) so it's a guesstimate at best.

The NAV (many assets have not been revalued for years) is higher than current price. Strong earnings growth.

As an existing shareholder, I hope they are priced higher than the current market price. The current price is 'low' partly due to the uncertainty created by the announcement.

I believe the intrinsic value of KPLC is north of 200/-.

@VVS. You were right. The conversion is being done at a price of Kshs 207.50. However, Govt is still screwing us as no revaluation of assets has been done.

I have recalculated the conversion "price" for KPLC to Kshs 240. In my initial computation, I had only taken into account the amount of Redeemable Preference Share Capital of Kshs 15,899,250,000.

Having reread the Press Announcement, it appears that the consideration for conversion includes the accumulated preference dividend that had been provided for in 2008-09 and 2009-10, an additional 2.496 Billion.

If this is the case, it means that the conversion price was to all intents and purposes fixed at the NSE market price - slight rounding up as the average price on Oct 5th and 6th was Kshs 237.