Not quite. If they take up their rights, that will only affect dividends, not profits.... and that is good for the company

Could they use retained earnings to participate in rights issues.

Oh ye of little faith.

Since when did investment affect operating profits?

As of 30th June 2010, Jubilee had an amount of over 5 billion (Yes, you "heard" that right, 5 billion) shillings in deposits with Financial Institutions. As such, they had more than enough cheddar to pay for all the rights they need to take up.

Of course some of this is required to meet their obligations under insurance contracts but 5B is more than enough.

While one could argue, that using this money on rights has an opportunity cost, I think that's hardly the case. Case in point, Jubilee paid Kshs 48 for its TPS rights. They are now valued at nearly Kshs 70. That's almost a 50% increase in value, while the deposits were probably earning <10% interest p.a.. We should be celebrating!! Actually, I am, while I add to my position in Jubilee.

Luckily for those eyeing KPLC rights, not too many insurance companies have that kind of might.

You do however raise an issue which could jeopardise many of our plans for acquiring the KPLC rights. If most institutions decide to go big on the KPLC rights, 10 B may soon look like small change. Who remembers how much Safaricom raised -over 200B if my memory serves me right? A 10th of that figure is already scary!

Another thing. Institutions are nowadays allowed to pay in their money after allocation. They therefore do not have to worry about their funds lying idle for too long.

Jub has 17m shares of DTB. DTB was at 89.50 as at dec 2009. Right now it's at 135.

135-90= 45

45*17m=765m in fair value gains which will be reflected on P&L.

Divide 765/ 50m shares and u get kshs. 15.1 per share of fair value gains just from DTB. I worked out and thus far, fair value gains on Jub investments are at about 1.2B. Let's be conservative and assume this figure to be 1B and also assume that the share prices move sideways for quoted stocks. Divide by 50m shares and that's 20bob per share. Add 15 bob for their other income(from ops and investment income aka rent, bonds etc) and you are lokking at 35 bob minimum eps.

value, deep pockets, continuously ameliorating assets (shares). Jubilee is looking really good this year. Cant wait to see FY results.

@horton I'm not so sure about a minimum EPS of 35 but I know things will be looking very good in their book with the rise of the NSE


The only issue I have is they may pay a FY dividend of only 5bob claiming that they are paying 100% of par value... I only hope they can couple this with a bonus issue....

Jubilee values its investments at book value in its balance sheet.I stand corrected but this means they don't add gains to their profits.