Kenya Commercial Bank offers rights issue at
Sh17
BY MICHAEL KARANJA
Updated 3 hours 39 minutes ago


NAIROBI, Kenya Jun 15 – The Kenya Commercial Bank has announced it will sell its Rights Issue to shareholders at Sh17 marking a 21 percent discount on the current share price.

Over the last six months, the banks shares have been trading at an average price of Sh21.50.

The bank will be seeking to raise a total of Sh15 billion through the 887.1 million shares being offered in the issue.

Making the announcement on Tuesday KCB Group Chairman Peter Muthoka said the bank’s rapid expansion into the region was putting pressure on the bank and that the injection of additional funding would help boost the banks capital base.

“The purpose of this rights issue is to raise additional capital to improve key bank ratios, fund business growth and consolidation across the markets and increase our capacity to provide long term finance,” Mr Muthoka said.

The offer will open at the Nairobi Stock Exchange on July 1 and closing on July 23. Allotment and announcement of the offer results will be made on August 5 and the shares is expected to begin trading at the NSE on August 19.

The Rights Issue will also be available to KCB shareholders in Uganda, Tanzania and Rwanda where the bank is cross-listed on the local bourses.

Shareholders will receive two (2) additional shares for every five (5) shares held.

The Rights Issue will increase the bank’s paid up capital to Sh3.1 billion shares of Sh1 each from Sh2.2 billion shares.

KCB is the largest bank by assets which currently stand at Sh195 billion. It is also the region’s largest commercial bank with 212 branches with operations in Kenya, Tanzania, Uganda, Rwanda and Southern Sudan.

As of first quarter results, the bank had managed to grow its balance sheet to Sh220 billion.

This will be the third Rights Issue by the bank and the largest in Kenya’s history (at Sh15 billion) after successful issues in 2004 (Sh2.45 billion) and 2008 (Sh5.5 billion).

KCB Chief Executive Martin Oduor-Otieno said the move is timely, as the bank had reached its cap in its ability to continue lending to customers.

“The growth in banks is determined by how strong you are from a capital base. You can only take so much deposits and write so much loans and advances if you have so much capital and today we have hit that level where any new growth has to come from new capital,” Mr Oduor-Otieno said.





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Good question there @VituVingiSana... what EPS to expect going forward.

However, we can analise what the Rights issue mean. Based on the 1st Qtr 2010 results and the current price of 21, KCB has a forward PE of about 8.74. At the price of 17 for the 2 for 5 Rights offer, if you bought the share today at 21, then, if you take up your Rights, you will be finally holding shares at an average price of 19.85. Assuming the EPS in the short run remains unchanged at the current 2.4, after the dilution, the new EPS would be 1.72. At your average price of 19.85, the share would have a PE of 11.57. Given Equity Bank has a forward PE of about 16, it means KCB post-Rights needs to rise to 27.45 to reach Equty Bank's PE. My bet then is that there is value in offer.

I think the price of KCB has been subdued as investors wished for the best deal on the Rights price. Now that the price is set, it will be interesting to see how the share trades cum Rights. If it edges beyond 21, decisions to BUY earlier were good decisions. If it falls, I would consider it a VERY GOOD BUY.

@Horton Get serious dude... even the simplest math done on the dilution and dividend yield cannot let the share fall below 19

Current issued shares = 2,218m
Rights offered = 887m

Therefore, total shares after rights = 3,105m

Current EPS = 2.05

Post rights EPS = 1.46

hmmm, thot the last rights issue was at 25/= and I highly doubt if KCB has ever gone beyond that 25/=. maybe it hit 30/= in the heat of the moment but that was really temporary

Anyone with the NAV figures? That will also be a good guide to post rights price.

Lowest price in the last FIVE years was 15.

The theoretical ex-rights price (19.9)seems to me too close to the current market price (21). I predict that the price ex-rights might actually be lower. Heck maybe even lower than the rights price (17)!

Number Price Value
Shares held 5 X 21 105
Rights 2 X 17 34
Total 7 139

Theoretical ex-rights price 19.9 (139/7)

I would buy if it fell below 15 bob. Key risk is what will management do with the money. Their RONIC over the last few capital raising is a shocker, their ROE at the moment is at the bottom of the listed banks pile. We all know they are raising cash to shore up capital ratios however if one looks closer, why do they pay high dividends and come back borrow money using the more expensive route...it amounts to doing a rights issue for paying dividends. Then there is the so called regional expansion which if it well thought out would make sense to finance but from the look of things has been a disaster save for Sudan which we know is short lived. Come to think of it when there are too many civil servants or ex civil servants in a listed company's baord expect a disaster. Look at KCB, KQ, KPLC, Kengen, NBK, Coop is also not far

HEHEHE the GOK has stayed out opting to be diluted instead...from 26% to something like 16%(media figures)...i bet in future they will opt out of KCB...

"The deal" uko bere kama mfuko ya chati! Knowing government they would not have accepted to be diluted if stakes were high, they would have forced a scheme to ensure they retained control eg debt, however it's one of those instutions GoK doesn't place much strategic value now. If GoK is is below 20% shouldn't the entire board change at the very least? Still can't understand why KCB refused the sane route - debt.

This time around rights are many ngoja July, it will be a BOGOFF!