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Kenya airways Right Issue
Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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Looking long term there is a lot to be bullish about, air travel on the African continent is yet to take off, expect more and more Africans to travel by air in coming years, yes competition will intensify but Africa's high passenger yields and KQ's first mover advantage should compensate...there is also a plan by an union of African airlines to start buying fuel together that will give them more bargaining power plus the global economy can't sustain current high oil prices so I expect oil to head south, dreamliners consume less fuel I.e 20% less..the share is greatly discounted..book value is around Sh30 I stand to be corrected...the share will take a beating in the short term so SELL before 19 March if u r not in it for long term..I also expect FY 2012 earnings to disappoint but margins should recover in H2 2013...but long term I.e 2015 the boeing should have a market cap of Sh 50b, on my blog http://contrarianinvestingkenya.info there is a guide to the rights issue.
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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the deal wrote:but long term I.e 2015 the boeing should have a market cap of Sh 50b, A 50b market cap will be only 25bob per share... Hardly great returns from the 14bob rights issue price... Mark 12:29
Deuteronomy 4:16
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Rank: Chief Joined: 5/31/2011 Posts: 5,121
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guru267 wrote:the deal wrote:but long term I.e 2015 the boeing should have a market cap of Sh 50b, A 50b market cap will be only 25bob per share... Hardly great returns from the 14bob rights issue price... Thats 90% capital gain in the 3 years + the dividends. One will have more than doubled their capital. @guru, what return would you be looking at for the level of risk that KQ counter bears?
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Rank: Chief Joined: 5/31/2011 Posts: 5,121
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Rank: Member Joined: 9/11/2007 Posts: 54 Location: Bermuda
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KQ has a market cap of only 8.2B and is looking to raise over 20B! The current shareholders will be greatly diluted. With oil prices rising and other airlines moving into the African airspace,potential returns for investors (both long term and short term) are unlikely to be great. When you see clouds gathering, prepare to catch rainwater. - African proverb
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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@StatMeister, the profit warning is in relation to the current year. Future periods will derive benefits from the dreamliners which are the principal acquisitions to be made by the rights proceeds.
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Rank: Veteran Joined: 5/23/2010 Posts: 868 Location: La Islas Galápagos
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Gordon Gekko wrote: @StatMeister, the profit warning is in relation to the current year. Future periods will derive benefits from the dreamliners which are the principal acquisitions to be made by the rights proceeds. Had not even read the press releases. Current year profits to fall short at least 25%. Over next 5 years, they borrow 180b. At 10% interest, sounds like interest payments work out at 18b. I dont see how doubling operations will generate additional operating profits of even 10b. KQ keeps making more money from derivatives than from operations. A bad day fishing is better than a good day at work
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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Rank: Elder Joined: 11/7/2007 Posts: 2,182
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a rights issue should have a lower number of shares than the existing shares, (my thinking) hii ni mbaya sana!! but KLM and GOK have assured a 50% uptake so it should be a success. LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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Rank: Chief Joined: 1/3/2007 Posts: 18,103 Location: Nairobi
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StatMeister wrote:
Over next 5 years, they borrow 180b. At 10% interest, sounds like interest payments work out at 18b. I dont see how doubling operations will generate additional operating profits of even 10b. KQ keeps making more money from derivatives than from operations.
1) The rates are much lower than 10% of USD loans. Probably closer to 5% coz borrowed from US EXIM Bank. 2) The 180bn is not borrowed in one go but gradually as planes are delivered. Therefore the additional payments are made after more planes are in service. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Elder Joined: 1/21/2010 Posts: 6,675 Location: Nairobi
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VituVingiSana wrote:
1) The rates are much lower than 10% of USD loans. Probably closer to 5% coz borrowed from US EXIM Bank.
So you believe 5 years from now KQ will manage to pay 9billion in just interest every year... Mark 12:29
Deuteronomy 4:16
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Rank: Chief Joined: 1/3/2007 Posts: 18,103 Location: Nairobi
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guru267 wrote:VituVingiSana wrote:
1) The rates are much lower than 10% of USD loans. Probably closer to 5% coz borrowed from US EXIM Bank.
So you believe 5 years from now KQ will manage to pay 9billion in just interest every year... I didn't say that but just pointed out the interest costs [coz new loans are likely to be in US$] I believe the KES 9bn is affordable AS LONG AS the flights run (average) 70% full, fuel prices are reasonable & JKIA remains a decent hub airport. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Elder Joined: 7/21/2010 Posts: 6,183 Location: nairobi
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Its panic,panic,panic pls run away. "Don't let the fear of losing be greater than the excitement of winning."
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Rank: Elder Joined: 9/23/2010 Posts: 2,220 Location: Sundowner,Amboseli
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Panic central this  @SufficientlyP
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Rank: Elder Joined: 7/11/2010 Posts: 5,040
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Gordon Gekko wrote:@Aguytrying.I am NOT fascinated by your
accurate calculations. You have made the assumption that there will be no increase in earnings.
KQ have stated their target is 100 planes. They must have done some logical analysis to arrive at this figure. Please remember that KQ have consistently had a load factor of 69%, a number I'm confident they will maintain even with the 100 planes.
The risk to KQ in my books are staff costs. Fuel spikes, hedges, crashes can be mitigated but they need to somehow resolve the HR riddle.
I expect a depression in price, ksh 10 is not far fetched, but I have previously bought at ksh 6.75 and got out in the 100s.
For sure, this is not for the faint hearted but the rewards are worth it. I was strictly predicting EPS for current financial year 2012, with regards to dilution by the rights. And not 2013 and beyond. The investor's chief problem - and even his worst enemy - is likely to be himself
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Rank: Elder Joined: 7/11/2010 Posts: 5,040
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When will the planes be delivered, whats the schedule of plane delivery? i believe there were some expected even before rights issue. Falling by the maximum 10% rule today. Its a good aggressive expansion plan, i'm pessimistic if they will pull it off. The investor's chief problem - and even his worst enemy - is likely to be himself
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Rank: Chief Joined: 1/13/2011 Posts: 5,964
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Interesting. Shrewd way of securing a client for the longrun ;-)
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Rank: Member Joined: 9/9/2010 Posts: 546 Location: Garissa
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KQ 16:5 rights will burn your fingures
If you can, sell your secondary rights of KQ at NSE and forfeit paying 14 bob for every 5 shares you have. KQ will start making positive returns from the rights issue partially in 2014 and the Dreamline delivery will have to work like clock work for KQ to give good returns for those who will have been holding the baby from 2012 to 2014. Wait for KQ at 10 bob or less after the rights issue and just when elections fever will be high as we end the year and before March 2013 or June 2013 if there will be a rerun. Those who have ears, let them hear. I foresee a political assassination this year. They have eyes, but do not see, they have ears but do not hear. Wisdom to detect when share prices hit rock bottom.
When interest on bonds keep going up, you know the bear run is on high street. When interest on bonds start leveling, the bear has met the bull and they have hit rock bottom. When the interest rates on bonds start coming down, the bull has overpowered the bear and you better be riding the bull.
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Rank: Veteran Joined: 4/30/2010 Posts: 1,635
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A great quote by some one "When you raise capital, always under promise and over deliver."
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Rank: Veteran Joined: 2/10/2010 Posts: 1,001 Location: River Road
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airlines are just capital gobblers it's like feeding a monster you don't feed it, it will bite you. I would rather give my capital to another sector financial or retail but not airlines.
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