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Kengen Bond vs Select Stocks
Rank: Elder Joined: 2/26/2008 Posts: 4,449
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The KGen bond has a guaranteed return of 12.5% p.a. which is a 6.25% semi-annual return. Acceptable and guaranteed rate of return as we help build our Nation.
However,given inflationary concerns,a relatively young SK crowd that can take on higher risk,I ask -
Which stocks do you anticipate to beat this rate of return as at:
1. 'Short-term' - by 30 April 2010 when first interest payment is made and why?
2. 'Mid-term' - by 30 April 2013 when Kenya has had its General Election and why?
3. 'Long-term' - by 30 April 2019 when this bond will be heading to history and why?
Your objective views pls. I'll offer mine as we go along.
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Rank: Elder Joined: 6/27/2008 Posts: 4,114
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If bond is taken up in full,elec supply will improve. Thus I would go with heavy power consumers who are suffering as a result of interruptions. Bamburi comes to mind immediately. KPLC will also benefit from this bond....they will have the elec to sell to their one million customers. EA Cables will benefit on the third level.... Perhaps a more interesting discussion would be,should I put my 100k in the bond or in the company? Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow) Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Rank: Veteran Joined: 7/24/2008 Posts: 781
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NMG,NBK,NIC,KPLC,ARM,DTB etc etc The utimate goal of investing is to buy low sell high;if we re-write this core equation in psychology terms it becomes buy fear sell greed.
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Rank: Member Joined: 4/22/2007 Posts: 96 Location: Agra, India
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I would go for stocks if i would invest 100k i would get 12k @ the end of the year.suppose i buy mumias @ 6.5 i would hv 15000 shares with 0.40 dividends giving me a dividend of 6000k plus potential of hitting 8 bob before ex div raising my capital to by 30k so if i decide to sell i would be much far ahead. thats wat i think. NAMASTE !Don't be unrealistic with your expectations It's easy for investors to get emotional and prejudiced when trading, but computers don't
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Rank: Member Joined: 9/1/2009 Posts: 21
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100,000kept to generate 12,000yearly? that makes it only 6000shs after 6months,unless the intrest was higher,i think my money can do much more elsewhere.i am of course talking on the minimum level,but even so......i think 100000shs can make you more than 12000shs happier after a year...just my thinking.
kujaribu ndio kupata
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Rank: Member Joined: 10/11/2008 Posts: 134
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12k less with holding tax ama?
Life is like an onion; you peel off one layer at a time and sometimes you weep. Carl Sandburg
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Rank: Member Joined: 11/15/2006 Posts: 44
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what inflation rate do you imagine for the Kenyan economy for this and next yr?
seeing AUG 09 inflation was over 18 % ..
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Rank: Member Joined: 8/29/2008 Posts: 571
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Bonds in general (like the KenGen bond) are good for people with large amounts of cash-not shs100,000 investors.And they invest in them coz they need their money back in the short to medium term.That's why it defeats logic to argue what stock is better than a bond.By the way,bond investors also have equities in their portfolio.
Ali Baba
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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IF its a bond vs shares debate,then over an economic cycle,you may find that the bond outperforms the share. It just depends on when you invest in that cycle. If its KenGen bond vs Kengen share,I'd be tempted to go for the bond. If its KenGen vs other NSE shares,shares win hands down over whatever period. www.mjengakenya.blogspot.comSehemu ndio nyumba
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Rank: Member Joined: 6/6/2009 Posts: 2
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I've worked out the future cash flows from the bond assuming i put in 1 million now and considering they will start ammortizing the bond after 3 years and I didn't like what I saw. My last interest payment in 2019 would be Kes. 3,906.00. If u discount that to its present value even with the conservative T-bill rate of 8%,it comes to a paltry Kes. 1,809.00. Now consider an underperfoming counter like Co-op bank who stood out by giving us half yr results headed north while everyone else was headed south. In ten years time,a divided payout of 2.00 sounds reasonable to me plus a market value in the region of 30.00 thats a capital gain of 200%. My take is that there are many other stocks that can outperform the kengen bond.
Its not your aptitude but your attitude that determines your altitude in life.
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Rank: Member Joined: 6/3/2006 Posts: 553
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Bonds Vs Stocks: Which is the better option for small investors The thicker the thigh the sweeter the pie. The thicker the thigh the sweeter the pie.
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Rank: Member Joined: 11/28/2006 Posts: 10
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Most investors agree that for the short term,bonds offer greater security and return. The situation changes,however,when time spans of longer than 10 years are considered. The stock market has consistently outperformed bond investments by a large factor. This is because companies continue to increase in value and any short term fluctuations in the stock market are smoothed out over time. Bonds still have their place in most portfolios,however. They provide a stable investment which helps to cushion against stock market fluctuation. A mixture of investments including stocks from various industries,bonds and other fixed-income investments is the way to provide maximum growth while securing your investment funds for the future. www.conceptadvisoryservices.co.ke...Investment agents
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Rank: Elder Joined: 2/26/2008 Posts: 4,449
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The young and the restless want highest return on investment over time. E.g. if you already contributing adequately to a pension scheme who love this kind of investment opportunities why tie up more of your investment in this 'safe' vehicle with sky rocketing inflation playing havoc on your investments? Recall the buy low sell high principle...of late foreigners heavy buy side KQ,SCOM,KCB,EABL as locals sell off for the PIBO.
Kengen Bond vs KQ or NBK in the mid to long term is a strong no brainer in favour of equities. who thinks otherwise?
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Rank: Elder Joined: 2/26/2008 Posts: 4,449
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As the government resorts to borrowing heavily from the domestic market,what effect does this have on interest rates and bond yields or redemptions?
this will help comparison with select shares.
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Rank: Member Joined: 11/15/2006 Posts: 44
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a bond offers a fixed predictable income but if a bond offers less than yearly inflation you are signing up to loose money for 10 years. I am trully impressed at Mr Njoroge's ability to line up companies to take 80 % of this ... plus even though the chance seems small now there is still a chance that they can default. A guaranteed loss balanced by the risk of loosing everything?
stocks rock
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Rank: Member Joined: 7/29/2008 Posts: 170
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given the option btw Kengen bond & kengen share,i wouldnt consider buying a 100k worth of KIBO not even a million.... its better off in the share,i still hold ma earlier position from another thread.... with 5m + i'd go for the bond... less than that,shares (offcourse not kengen only) main reason being ease of disposing it just incase interest rates decides to go up especially now that the govt is borrowing heavily from the public,this might push the rates northwards to make em attractive and as a result bond prices suffer.....
another part of me still subcribes to the rough guide that 'bonds are directly proportional to one's age' such that if am 30 yrs old,30% of my portfolio should be fixed income e.g bonds the balance equities....
Its just me
whatever choice you make in life make sure that you can live with it.
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Rank: Member Joined: 8/8/2009 Posts: 170
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It all boils down to how you measure or quantify the risk on this offer/company. Partly-government-owned KenGen is too big and too important to fail....
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Rank: Member Joined: 11/15/2006 Posts: 44
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Too big to fail? Like enron,lehman or uchumi?
Ten years is a long time,who knows what the world will look like.
Am not pushing any agenda,I don't mind anyone buying the bond,i am jus realistic about what it offers
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Rank: Member Joined: 5/8/2009 Posts: 263 Location: Gigiri, Nairobi
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@All the fast and furious v Now,I understand the KenGen bond cannot be traded at the secondary market until after two years. v Or what was that thing about after two years? v If that is the case,I can swear by my old man that Safaricom,Cables,NBK,Equity etc will have tripled in the next two years before slowing down due to elections fever. v What about the interest of 12.5%,will they start paying after two years? >>>>>>It saves you hell if you treat new acquaintances as enemies consistently until each proves otherwise or confirms - Jsanchiazh. >>>>>>>In life,there are three classes of people,those who make things happen,those who watch things happen and those who ask what happened. Where do you fall? >>>>>>
A thing of beauty is a joy for ever:
Its loveliness increases;
It will never pass into nothingness;
But still will keep a bower quiet for us,
and a sleep full of sweet dreams,
and health, and quiet breathing. - Keats
>>>>>>>In life,there are three classes of people,
1. Those who make things happen,
2. Those who watch things happen
3. And those who ask what happened.
Where do you fall?
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Rank: Elder Joined: 2/26/2008 Posts: 4,449
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Return here every 24 months with your inflation battered 12.5% p.a. return and compare:-
Kengen vs SCOM (SCOM the most profitable firm in EA considering share consolidation/buyback. Ksh 3.80)
Kengen vs KQ (Despite increased wage bill,fuel hedges off in next year and international travel set to pick up with most economies beginning to pickup. Slumped at Ksh 21.75)
Kengen vs KCB (4% growth in previous quarters. With less risk aversion this financial is still solid and set to gradually recover. Ksh. 20.50 throwaway price)
Kengen vs HFCK (HFCK recording great growth in a depressed economy in a booming construction sector. new product launch soon for the middle class set to shuttle this into more steady gear)
Kengen vs NBK (dividends start trickling in next year and inevitable management change looms in the mid-term. need any more reason. trading at Ksh 35/= )
NB: This omits the entry of Orange or Family Bank into the NSE.
Let the future speak for itself. What say you?
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Kengen Bond vs Select Stocks
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