Wazua
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Playing the Market............. 2025
Rank: Member Joined: 9/26/2006 Posts: 445 Location: CENTRAL PROVINCE
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mufasa wrote:Good call on Umeme,I thought about it myself. However, I think I will wait for the final Dividend before exit. Based on the intergrated financial report for year ending 2024, the company plans to enter into a new business development phase upto Dec 2026 using the buyout amount and any funds at its disposal even as it pursues the remaining buy out amount of USD 292M under arbitration in London. I anticipate very limited dividends if any for the next 2 years as the company enters an investment phase. The silver lining remains a positive arbitration outcome as that represents Ksh 23 per share but that's probably around that Dec 2026 horizon. Happy hunting
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Rank: Member Joined: 9/26/2006 Posts: 445 Location: CENTRAL PROVINCE
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young wrote:stocksmaster wrote:stocksmaster wrote:stocksmaster wrote:stocksmaster wrote:In the last year and more so the last month, the NSE Equities market has shown recovery from a prolonged slump. As T bills approach single digits returns, smart money has started flowing into the equities market which are still heavily discounted. Several counters have started approaching their true market value but a few still present opportunities for outsized returns. As money exits treasury bills and bonds, it will be seeking equities that can deliver similar returns to the 2024 interest rates of 15-18% (through mainly dividends but also potential capital gains)
The following are my picks for 2025 (in order of priority)
1. KCB (Current Price: Ksh 41.50; Target Price range Ksh 60-65 by Dec 31st 2025); About 50% Upside
Currently the most undervalued bank share, the bank is on course to report a net profit of Ksh 60bn (about Ksh 18 earnings per share) despite havings NPLs worth over 215bn as at 3rd quarter (18.5% of loan portfolio).The dividend policy for KCB is to distribute upto 50% of net earnings. A conservative dividend of 35% of net earnings could mean a dividend of Ksh 6.50 for 2024 (deduct Ksh 1.50 interim dividend for a potential final dividend of Ksh 5.00). It is also in the process of selling National Bank of Kenya, its subsidiary, to Access bank by March 2025. The value of the transaction as at Q3 2024 was 1.25 x 12bn (book value) = Ksh 15bn. By March 2025, the NBK value should be about 16bn, hence about Ksh 5 per KCB share which presents a possibility for a special dividend of about Ksh 2 (if 40% of the sale are distributed). Add half year interim dividend 2025 of about Ksh 1.50 - 2.00 , and this adds up to about 20% in potential dividends in the next 9 months.
The Ksh 215bn NPLs representing 18.5% of loan portfolio while presenting a risk to investment, also provides a major opportunity since a major recovery in this ratio would turbo charge profits for 2025.
2. UMEME (Current Price: Ksh 16.75; Target Price-Concession buy out price of Ksh 20 plus dividends/retained earnings of Ksh 5-10); About 50% upside within the next 90 days.
The 20 year Umeme Concession ends on 28th February 2025 and with the Uganda government having decided not to renew it, are bond by the concession agreement to pay Umeme for all unrecovered investments plus a 5% premium by 31st March 2025. Current estimates of the buy out amount ranges from USD 225M (Uganda Energy PS estimate in early 2024) to 255M (latest Uganda Govt estimate in Oct 2024) to 283M (Umeme Management Estimate). With 1.62bn shares, that works out to between Ksh 18 - 20.5 - 22.70 (Median of about Ksh 20.5). The company after the end of the concession will most likely delist from both the Nairobi and Uganda stocks exchanges. This means distribution of buy out amount and shareholders equity and 2024 earnings to the shareholders. (The company cleared all its long term debt by Dec 2023). Retained earnings as at June 2024 were worth about Ksh 10 per share and translation reserves about Ksh 4.50.As at Half year 2024, total shareholder equity was worth about Ksh 17 per share.
Depending on the direction the company decides to take after the concession lapses on 31st March 2025, the next 90 days could deliver some outsized returns to the shareholders. It is worth noting that any delay in payment by Uganda Govt after March 31st will attract an interest of 10% p.a btw days 30-45; 15% p.a btw days 46-90 days and 20% p.a after day 90 until the amount is settled in full.
It should however be noted that this is a highly speculative 90 day play that has many variables e.g the Auditor General of Uganda whose mandated to audit the Umeme Investments may refuse to recognize some of the investments hence reducing the buy out amount; African politics may come into play although almost a quarter of Umeme is held by the NSSF Uganda; lack of budget allocation to support the buyout (the amount was not captured in the June 2024-2025 budget hence indicating potential delays) etc., potential last minute renewal of the concession but at lower margins for Umeme (the 20% guaranteed returns were one of the issues the GoU had with the agreement and are hoping for a partner that can assure much less for cheaper elec).
3. KENGEN (Current Price: 3.64; Target Price Ksh 5.00); About 40% Upside
KenGen is currently trading at a dividend yield of almost 18%. The government policy that is partially responsible for government trading entities to pay at least 80% of earnings as dividends is still in place upto end of June 2025 and this was incorporated into the performance contracts of the CEOs of these parastatals. The company is also expected to get a windfall of over Ksh 4.1bn by end of 1st half of current financial year from selling about 70% of its carbon credits (the carbon credits amount adds up to almost same amount being paid as dividends for financial year ending June 2024). With stability of the Ksh versus dollar and a more liquid KPLC (paying its debts due to KenGen within their 40 day agreement; KPLC owed KenGen about 17bn as at June 2024 and paid fines for late payments amounting to 710mn for financial year ending June 2024). Shortage of power in Western Kenya has also seen the revival of KenGens Muhoroni Gas Turbines last month which will inject 60MW to the grid. This power purchase agreement with KPLC had expired in June 2023 and the plant had been subsequently shut. In November 2024, the plant has supplied 688,650 kWh in it first month after revival. Projects geared at increasing KenGens power generation capacity are also ongoing and should in the long term increase the electricity generation capacity of the company. It is also engaged in an Africa wide geothermal drilling which is earning the company additional revenue from its leadership in this market niche.
I anticipate at least a dividend of Ksh 0.65 for financial year 2025 which should propel the price towards the Ksh 5.00 – 5.50 by October 2025.
4. BAT (Current Price: Ksh 376; Target Price Ksh 450); About 20% upside
BAT has been heavily penalized by the market following the inability to acquire a license to start production of oral nicotine pouches despite having a factory to manufacture the same since 2019 (5 years old). This has forced the company to sell the machinery (from July 2024) and shelve the nicotine pouches idea.
BAT is currently trading at a dividend yield of 13.3%. Despite the half year 2024 EPS falling from Ksh 28.22 to Ksh 21.36, the interim dividend was retained at Ksh 5. The 24% drop in earnings was attributed to a 10% drop in net revenue, foreign exchange losses from its exports amid a strengthening shilling, and a 700M increase in costs of repaying loans due to the foreign exchange movements. The nicotine pouches issue clearly destabilized the company with capital tied up (the factory investment was reported at Ksh 2.5bn) and human resource that must have been scaled up for this operation. The 19th December 2024 communication to staff on imminent staff reduction exercise to drive efficiencies and optimize operations highlights this fact. With a 2024 EPS of about 43-45, and a policy of distributing 85-90% of earnings, a final dividend of Ksh 35-40 is likely. BAT has retained earnings of over 10Bn which can be tapped into to maintain dividends at similar levels to last financial year. The sale of the nicotine pouches factory machinery should also generate some salvage value of at least 1bn – 1.5bn from this investment). Should it maintain its dividends in the Ksh 45-50, the share should reclaim its true value of about Ksh 450 (10% dividend yield).
Happy Hunting in 2025
MID YEAR EVALUATION OF PERFORMANCE: Six months ago, I gave my stock picks. How have each performed six months later? KCB: Currently trading at Ksh 47-48 range and paid a final dividend for 2024 of Ksh 1.50 since the recommendation. That's approximately Ksh 9 capitals gains (about 22% capital gains) in 6 months. The NBK sale was finalised and theirs Ethiopia play in the cards. The share is still one of the most undervalued and I expect it to approach the Ksh 60 levels in the remaining next 6 months of this year. UMEME: Currently at Ksh 22.9 having gained over 9% today alone. The share is trading at 37% capital gain since my recommendation. I had specified that it was a highly speculative play but it has delivered well. KENGEN: Currently at Ksh 7.30. That's a gain of 100% since my recommendation. I still believe it has the legs to propel it higher before year end. BAT: Currently at 375 hence trading at exactly same price as at Dec 31st 2024. But it did pay a final dividend of Ksh 45 hence a 12% return on investment in that 6 months holding period. May not bring much capital gains in share price but it's doing great as a dividend stock by paying more than the current prevailing T-Bill rates of 8-9%. The four stocks above as a basket have thus delivered an average return of about 42.5% for the 6 months. For the second half of the year, I intend to add one more stock as I likely exit one current stock. Still doing the analysis on which to exit and which to add but will post here soon as always. Happy Hunting Umeme Trading Update: Exited UMEME at Ksh 23.30 since it presented a good selling opportunity to book a 39% capital gain amidst alot of uncertainty. While I expect the company to win it's case against GoU on the concession arbitration on the buy out price, it may take about 18-24 months resulting in alot of tied up capital. I may consider re-entry into the company down the line post dividend as I expect the price to go down significantly. Their cash at bank after paying this dividends will also influence my re-entry since the company does not have any other source of future funds for dividends in the short term except the cash at bank and the outcome of the litigation in London. Currently evaluating one stock for re-entry with the umeme proceeds which I will post here soon once I finish the in-depth analysis. Happy Hunting. New Entry: BK Group at Ksh 35.05 ; Target Price: Ksh 42.00 (20% Capital gain)After exiting Umeme, i have boarded BK Group Plc currently trading at Ksh 35.05 which is the KCB of Rwanda. The Group is mainly owned by the Government of Rwanda (about 30%) and the Rwanda Social Security Board (their NSSF) about 25% ensuring preferential government business in Rwanda. With its 79 branches, it enjoys 1/3rd of banking market share in Rwanda. For the last half decade, it has averaged over 20% ROE per year. The group has five subsidiaries: the Bank of Kigali, BK General Insuarance, BK Tech House (its fintec arm), BK Capital (investment advisory and brokerage services) and BK Foundation (CSR arm). In 2024, it reported an EPS of about Ksh 8.75 and dividends of about Ksh 2.64 (30% pay out ratio) hence currently trading at about 7.5% dividend yield and P/E of about 4. The Bank has a NPL Ratio of 3.2% (In Kenya, the NPLs are at 17.4% for the banking industry). Its profits have grown by an average of 19.2% per year over the past 5 years. Based on the above metrics, i anticipate a 2025 EPS of about Ksh 10.50 and a dividend of Ksh 3.15. The very low NPLs and constant 19-20% growth per year coupled with falling operating expenses (Q1 2025,expenses dropped by 10.1% contributing to a cost to income ratio of 33.9%) presents a very attractive solid banking stock for the next 2-3 years especially when compared with a worsening NPL position for Kenyan banks. The group also has an interesting way of handling dividends through a dividends reinvestment plan (DRIP) which gives the shareholder the option to convert their dividends to more shares at a 5% discount to the prevailing market price. Happy Hunting Good Analysis. But the fact is that counter BK group is not liquid. Always thinly traded. The challenge will be difficulty on entry (BUY) and EXIT (SALE) if you are considering capital gain. BAT Half year EPS up 39.7% while interim dividend up 100% to Ksh 10. The final dividend will most likely be Ksh 50 hence a total dividend of Ksh 60 for this year. The price target of Ksh 450 for this year now becomes a certainty. I expect a short term price rally to 400-420 levels before books closure for interim dividend. Happy Hunting.
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Rank: Elder Joined: 7/22/2009 Posts: 7,589
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stocksmaster wrote:young wrote:stocksmaster wrote:stocksmaster wrote:stocksmaster wrote:stocksmaster wrote:In the last year and more so the last month, the NSE Equities market has shown recovery from a prolonged slump. As T bills approach single digits returns, smart money has started flowing into the equities market which are still heavily discounted. Several counters have started approaching their true market value but a few still present opportunities for outsized returns. As money exits treasury bills and bonds, it will be seeking equities that can deliver similar returns to the 2024 interest rates of 15-18% (through mainly dividends but also potential capital gains)
The following are my picks for 2025 (in order of priority)
1. KCB (Current Price: Ksh 41.50; Target Price range Ksh 60-65 by Dec 31st 2025); About 50% Upside
Currently the most undervalued bank share, the bank is on course to report a net profit of Ksh 60bn (about Ksh 18 earnings per share) despite havings NPLs worth over 215bn as at 3rd quarter (18.5% of loan portfolio).The dividend policy for KCB is to distribute upto 50% of net earnings. A conservative dividend of 35% of net earnings could mean a dividend of Ksh 6.50 for 2024 (deduct Ksh 1.50 interim dividend for a potential final dividend of Ksh 5.00). It is also in the process of selling National Bank of Kenya, its subsidiary, to Access bank by March 2025. The value of the transaction as at Q3 2024 was 1.25 x 12bn (book value) = Ksh 15bn. By March 2025, the NBK value should be about 16bn, hence about Ksh 5 per KCB share which presents a possibility for a special dividend of about Ksh 2 (if 40% of the sale are distributed). Add half year interim dividend 2025 of about Ksh 1.50 - 2.00 , and this adds up to about 20% in potential dividends in the next 9 months.
The Ksh 215bn NPLs representing 18.5% of loan portfolio while presenting a risk to investment, also provides a major opportunity since a major recovery in this ratio would turbo charge profits for 2025.
2. UMEME (Current Price: Ksh 16.75; Target Price-Concession buy out price of Ksh 20 plus dividends/retained earnings of Ksh 5-10); About 50% upside within the next 90 days.
The 20 year Umeme Concession ends on 28th February 2025 and with the Uganda government having decided not to renew it, are bond by the concession agreement to pay Umeme for all unrecovered investments plus a 5% premium by 31st March 2025. Current estimates of the buy out amount ranges from USD 225M (Uganda Energy PS estimate in early 2024) to 255M (latest Uganda Govt estimate in Oct 2024) to 283M (Umeme Management Estimate). With 1.62bn shares, that works out to between Ksh 18 - 20.5 - 22.70 (Median of about Ksh 20.5). The company after the end of the concession will most likely delist from both the Nairobi and Uganda stocks exchanges. This means distribution of buy out amount and shareholders equity and 2024 earnings to the shareholders. (The company cleared all its long term debt by Dec 2023). Retained earnings as at June 2024 were worth about Ksh 10 per share and translation reserves about Ksh 4.50.As at Half year 2024, total shareholder equity was worth about Ksh 17 per share.
Depending on the direction the company decides to take after the concession lapses on 31st March 2025, the next 90 days could deliver some outsized returns to the shareholders. It is worth noting that any delay in payment by Uganda Govt after March 31st will attract an interest of 10% p.a btw days 30-45; 15% p.a btw days 46-90 days and 20% p.a after day 90 until the amount is settled in full.
It should however be noted that this is a highly speculative 90 day play that has many variables e.g the Auditor General of Uganda whose mandated to audit the Umeme Investments may refuse to recognize some of the investments hence reducing the buy out amount; African politics may come into play although almost a quarter of Umeme is held by the NSSF Uganda; lack of budget allocation to support the buyout (the amount was not captured in the June 2024-2025 budget hence indicating potential delays) etc., potential last minute renewal of the concession but at lower margins for Umeme (the 20% guaranteed returns were one of the issues the GoU had with the agreement and are hoping for a partner that can assure much less for cheaper elec).
3. KENGEN (Current Price: 3.64; Target Price Ksh 5.00); About 40% Upside
KenGen is currently trading at a dividend yield of almost 18%. The government policy that is partially responsible for government trading entities to pay at least 80% of earnings as dividends is still in place upto end of June 2025 and this was incorporated into the performance contracts of the CEOs of these parastatals. The company is also expected to get a windfall of over Ksh 4.1bn by end of 1st half of current financial year from selling about 70% of its carbon credits (the carbon credits amount adds up to almost same amount being paid as dividends for financial year ending June 2024). With stability of the Ksh versus dollar and a more liquid KPLC (paying its debts due to KenGen within their 40 day agreement; KPLC owed KenGen about 17bn as at June 2024 and paid fines for late payments amounting to 710mn for financial year ending June 2024). Shortage of power in Western Kenya has also seen the revival of KenGens Muhoroni Gas Turbines last month which will inject 60MW to the grid. This power purchase agreement with KPLC had expired in June 2023 and the plant had been subsequently shut. In November 2024, the plant has supplied 688,650 kWh in it first month after revival. Projects geared at increasing KenGens power generation capacity are also ongoing and should in the long term increase the electricity generation capacity of the company. It is also engaged in an Africa wide geothermal drilling which is earning the company additional revenue from its leadership in this market niche.
I anticipate at least a dividend of Ksh 0.65 for financial year 2025 which should propel the price towards the Ksh 5.00 – 5.50 by October 2025.
4. BAT (Current Price: Ksh 376; Target Price Ksh 450); About 20% upside
BAT has been heavily penalized by the market following the inability to acquire a license to start production of oral nicotine pouches despite having a factory to manufacture the same since 2019 (5 years old). This has forced the company to sell the machinery (from July 2024) and shelve the nicotine pouches idea.
BAT is currently trading at a dividend yield of 13.3%. Despite the half year 2024 EPS falling from Ksh 28.22 to Ksh 21.36, the interim dividend was retained at Ksh 5. The 24% drop in earnings was attributed to a 10% drop in net revenue, foreign exchange losses from its exports amid a strengthening shilling, and a 700M increase in costs of repaying loans due to the foreign exchange movements. The nicotine pouches issue clearly destabilized the company with capital tied up (the factory investment was reported at Ksh 2.5bn) and human resource that must have been scaled up for this operation. The 19th December 2024 communication to staff on imminent staff reduction exercise to drive efficiencies and optimize operations highlights this fact. With a 2024 EPS of about 43-45, and a policy of distributing 85-90% of earnings, a final dividend of Ksh 35-40 is likely. BAT has retained earnings of over 10Bn which can be tapped into to maintain dividends at similar levels to last financial year. The sale of the nicotine pouches factory machinery should also generate some salvage value of at least 1bn – 1.5bn from this investment). Should it maintain its dividends in the Ksh 45-50, the share should reclaim its true value of about Ksh 450 (10% dividend yield).
Happy Hunting in 2025
MID YEAR EVALUATION OF PERFORMANCE: Six months ago, I gave my stock picks. How have each performed six months later? KCB: Currently trading at Ksh 47-48 range and paid a final dividend for 2024 of Ksh 1.50 since the recommendation. That's approximately Ksh 9 capitals gains (about 22% capital gains) in 6 months. The NBK sale was finalised and theirs Ethiopia play in the cards. The share is still one of the most undervalued and I expect it to approach the Ksh 60 levels in the remaining next 6 months of this year. UMEME: Currently at Ksh 22.9 having gained over 9% today alone. The share is trading at 37% capital gain since my recommendation. I had specified that it was a highly speculative play but it has delivered well. KENGEN: Currently at Ksh 7.30. That's a gain of 100% since my recommendation. I still believe it has the legs to propel it higher before year end. BAT: Currently at 375 hence trading at exactly same price as at Dec 31st 2024. But it did pay a final dividend of Ksh 45 hence a 12% return on investment in that 6 months holding period. May not bring much capital gains in share price but it's doing great as a dividend stock by paying more than the current prevailing T-Bill rates of 8-9%. The four stocks above as a basket have thus delivered an average return of about 42.5% for the 6 months. For the second half of the year, I intend to add one more stock as I likely exit one current stock. Still doing the analysis on which to exit and which to add but will post here soon as always. Happy Hunting Umeme Trading Update: Exited UMEME at Ksh 23.30 since it presented a good selling opportunity to book a 39% capital gain amidst alot of uncertainty. While I expect the company to win it's case against GoU on the concession arbitration on the buy out price, it may take about 18-24 months resulting in alot of tied up capital. I may consider re-entry into the company down the line post dividend as I expect the price to go down significantly. Their cash at bank after paying this dividends will also influence my re-entry since the company does not have any other source of future funds for dividends in the short term except the cash at bank and the outcome of the litigation in London. Currently evaluating one stock for re-entry with the umeme proceeds which I will post here soon once I finish the in-depth analysis. Happy Hunting. New Entry: BK Group at Ksh 35.05 ; Target Price: Ksh 42.00 (20% Capital gain)After exiting Umeme, i have boarded BK Group Plc currently trading at Ksh 35.05 which is the KCB of Rwanda. The Group is mainly owned by the Government of Rwanda (about 30%) and the Rwanda Social Security Board (their NSSF) about 25% ensuring preferential government business in Rwanda. With its 79 branches, it enjoys 1/3rd of banking market share in Rwanda. For the last half decade, it has averaged over 20% ROE per year. The group has five subsidiaries: the Bank of Kigali, BK General Insuarance, BK Tech House (its fintec arm), BK Capital (investment advisory and brokerage services) and BK Foundation (CSR arm). In 2024, it reported an EPS of about Ksh 8.75 and dividends of about Ksh 2.64 (30% pay out ratio) hence currently trading at about 7.5% dividend yield and P/E of about 4. The Bank has a NPL Ratio of 3.2% (In Kenya, the NPLs are at 17.4% for the banking industry). Its profits have grown by an average of 19.2% per year over the past 5 years. Based on the above metrics, i anticipate a 2025 EPS of about Ksh 10.50 and a dividend of Ksh 3.15. The very low NPLs and constant 19-20% growth per year coupled with falling operating expenses (Q1 2025,expenses dropped by 10.1% contributing to a cost to income ratio of 33.9%) presents a very attractive solid banking stock for the next 2-3 years especially when compared with a worsening NPL position for Kenyan banks. The group also has an interesting way of handling dividends through a dividends reinvestment plan (DRIP) which gives the shareholder the option to convert their dividends to more shares at a 5% discount to the prevailing market price. Happy Hunting Good Analysis. But the fact is that counter BK group is not liquid. Always thinly traded. The challenge will be difficulty on entry (BUY) and EXIT (SALE) if you are considering capital gain. BAT Half year EPS up 39.7% while interim dividend up 100% to Ksh 10. The final dividend will most likely be Ksh 50 hence a total dividend of Ksh 60 for this year. The price target of Ksh 450 for this year now becomes a certainty. I expect a short term price rally to 400-420 levels before books closure for interim dividend. Happy Hunting. Great stuff @stockmaster  I am calling a final dividend of Kshs. 50/= bring total dividends for the year to Kshs. 60/= Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 6/23/2009 Posts: 13,796 Location: nairobi
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mufasa wrote:Good call on Umeme,I thought about it myself. However, I think I will wait for the final Dividend before exit. Sending hugs https://kenyanwallstreet...-exposes-investor-risks/
COOP 255,000 ABP 15.85; IMH 5,000 ABP 35.55; KQ 604,200 ABP 6.96; MTN 23,800 ABP 5.20
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Rank: Member Joined: 4/15/2008 Posts: 218
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obiero wrote:[quote=mufasa]Good call on Umeme,I thought about it myself. However, I think I will wait for the final Dividend before exit. Sending hugs https://kenyanwallstreet...exposes-investor-risks/[/quote] Ukishikwa, Shikamana. I got burnt here. I exited at 13.3 and strengthened my KCB position. Do it today! Tomorrow is promise to no-one.
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Rank: Veteran Joined: 7/1/2014 Posts: 923 Location: sky
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obiero wrote:[quote=mufasa]Good call on Umeme,I thought about it myself. However, I think I will wait for the final Dividend before exit. Sending hugs https://kenyanwallstreet...exposes-investor-risks/[/quote] Just checked the above article (paragraph below) Umeme announced a record interim dividend of Sh8 per share (Ush222), funded from a partial government buyout payment. But its future now depends on the outcome of a bitter buyout dispute. The Ugandan government paid $118 million for unrecovered investments, far short of Umeme’s $292 million claim. The company has triggered a formal dispute and started international arbitration in London. That very scaring for investors who are still holding umeme, - The government of uganda was ready to pay around ksh 9 to investors, does that mean it has already paid part of ksh 9 which has already been distributed as dividend? if yes how much did they pay and what is remaining?? There are only two emotions in the stock market, fear and hope. The problem is, you hope when you should fear and fear when you should hope
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Rank: Elder Joined: 6/23/2009 Posts: 13,796 Location: nairobi
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mufasa wrote:obiero wrote:[quote=mufasa]Good call on Umeme,I thought about it myself. However, I think I will wait for the final Dividend before exit. Sending hugs https://kenyanwallstreet...exposes-investor-risks/[/quote] Ukishikwa, Shikamana. I got burnt here. I exited at 13.3 and strengthened my KCB position. wise. you've got to know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run
COOP 255,000 ABP 15.85; IMH 5,000 ABP 35.55; KQ 604,200 ABP 6.96; MTN 23,800 ABP 5.20
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Rank: Elder Joined: 12/7/2012 Posts: 11,924
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As a diehard BAT fan, I am happy finally we are back to 420 - 450 range after a long time. Plus 10 bob interim dividend coming in September. In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Elder Joined: 7/22/2009 Posts: 7,589
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My heavy loading on KCB continues. Finally got my last purchases for the next 3 months or so in yeterday. Been throwing everything I have at KCB. My final phase of KCB buys will be between November and the release date for FY 2025 results (based purely on cash flow). Wanted to get all purchases for this phase in before HY results are released because good stuff might come to light affecting the price moving forward. Now waiting for the results! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Veteran Joined: 6/17/2009 Posts: 1,622
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MaichBlack wrote:My heavy loading on KCB continues. Finally got my last purchases for the next 3 months or so in yeterday. Been throwing everything I have at KCB.
My final phase of KCB buys will be between November and the release date for FY 2025 results (based purely on cash flow).
Wanted to get all purchases for this phase in before HY results are released because good stuff might come to light affecting the price moving forward. Now waiting for the results! Enjoy the dividend.ksh 2 interim,ksh 2 special dividend.
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Rank: Member Joined: 9/26/2006 Posts: 445 Location: CENTRAL PROVINCE
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stocksmaster wrote:In the last year and more so the last month, the NSE Equities market has shown recovery from a prolonged slump. As T bills approach single digits returns, smart money has started flowing into the equities market which are still heavily discounted. Several counters have started approaching their true market value but a few still present opportunities for outsized returns. As money exits treasury bills and bonds, it will be seeking equities that can deliver similar returns to the 2024 interest rates of 15-18% (through mainly dividends but also potential capital gains)
The following are my picks for 2025 (in order of priority)
1. KCB (Current Price: Ksh 41.50; Target Price range Ksh 60-65 by Dec 31st 2025); About 50% Upside
Currently the most undervalued bank share, the bank is on course to report a net profit of Ksh 60bn (about Ksh 18 earnings per share) despite havings NPLs worth over 215bn as at 3rd quarter (18.5% of loan portfolio).The dividend policy for KCB is to distribute upto 50% of net earnings. A conservative dividend of 35% of net earnings could mean a dividend of Ksh 6.50 for 2024 (deduct Ksh 1.50 interim dividend for a potential final dividend of Ksh 5.00). It is also in the process of selling National Bank of Kenya, its subsidiary, to Access bank by March 2025. The value of the transaction as at Q3 2024 was 1.25 x 12bn (book value) = Ksh 15bn. By March 2025, the NBK value should be about 16bn, hence about Ksh 5 per KCB share which presents a possibility for a special dividend of about Ksh 2 (if 40% of the sale are distributed). Add half year interim dividend 2025 of about Ksh 1.50 - 2.00 , and this adds up to about 20% in potential dividends in the next 9 months.
The Ksh 215bn NPLs representing 18.5% of loan portfolio while presenting a risk to investment, also provides a major opportunity since a major recovery in this ratio would turbo charge profits for 2025.
2. UMEME (Current Price: Ksh 16.75; Target Price-Concession buy out price of Ksh 20 plus dividends/retained earnings of Ksh 5-10); About 50% upside within the next 90 days.
The 20 year Umeme Concession ends on 28th February 2025 and with the Uganda government having decided not to renew it, are bond by the concession agreement to pay Umeme for all unrecovered investments plus a 5% premium by 31st March 2025. Current estimates of the buy out amount ranges from USD 225M (Uganda Energy PS estimate in early 2024) to 255M (latest Uganda Govt estimate in Oct 2024) to 283M (Umeme Management Estimate). With 1.62bn shares, that works out to between Ksh 18 - 20.5 - 22.70 (Median of about Ksh 20.5). The company after the end of the concession will most likely delist from both the Nairobi and Uganda stocks exchanges. This means distribution of buy out amount and shareholders equity and 2024 earnings to the shareholders. (The company cleared all its long term debt by Dec 2023). Retained earnings as at June 2024 were worth about Ksh 10 per share and translation reserves about Ksh 4.50.As at Half year 2024, total shareholder equity was worth about Ksh 17 per share.
Depending on the direction the company decides to take after the concession lapses on 31st March 2025, the next 90 days could deliver some outsized returns to the shareholders. It is worth noting that any delay in payment by Uganda Govt after March 31st will attract an interest of 10% p.a btw days 30-45; 15% p.a btw days 46-90 days and 20% p.a after day 90 until the amount is settled in full.
It should however be noted that this is a highly speculative 90 day play that has many variables e.g the Auditor General of Uganda whose mandated to audit the Umeme Investments may refuse to recognize some of the investments hence reducing the buy out amount; African politics may come into play although almost a quarter of Umeme is held by the NSSF Uganda; lack of budget allocation to support the buyout (the amount was not captured in the June 2024-2025 budget hence indicating potential delays) etc., potential last minute renewal of the concession but at lower margins for Umeme (the 20% guaranteed returns were one of the issues the GoU had with the agreement and are hoping for a partner that can assure much less for cheaper elec).
3. KENGEN (Current Price: 3.64; Target Price Ksh 5.00); About 40% Upside
KenGen is currently trading at a dividend yield of almost 18%. The government policy that is partially responsible for government trading entities to pay at least 80% of earnings as dividends is still in place upto end of June 2025 and this was incorporated into the performance contracts of the CEOs of these parastatals. The company is also expected to get a windfall of over Ksh 4.1bn by end of 1st half of current financial year from selling about 70% of its carbon credits (the carbon credits amount adds up to almost same amount being paid as dividends for financial year ending June 2024). With stability of the Ksh versus dollar and a more liquid KPLC (paying its debts due to KenGen within their 40 day agreement; KPLC owed KenGen about 17bn as at June 2024 and paid fines for late payments amounting to 710mn for financial year ending June 2024). Shortage of power in Western Kenya has also seen the revival of KenGens Muhoroni Gas Turbines last month which will inject 60MW to the grid. This power purchase agreement with KPLC had expired in June 2023 and the plant had been subsequently shut. In November 2024, the plant has supplied 688,650 kWh in it first month after revival. Projects geared at increasing KenGens power generation capacity are also ongoing and should in the long term increase the electricity generation capacity of the company. It is also engaged in an Africa wide geothermal drilling which is earning the company additional revenue from its leadership in this market niche.
I anticipate at least a dividend of Ksh 0.65 for financial year 2025 which should propel the price towards the Ksh 5.00 – 5.50 by October 2025.
4. BAT (Current Price: Ksh 376; Target Price Ksh 450); About 20% upside
BAT has been heavily penalized by the market following the inability to acquire a license to start production of oral nicotine pouches despite having a factory to manufacture the same since 2019 (5 years old). This has forced the company to sell the machinery (from July 2024) and shelve the nicotine pouches idea.
BAT is currently trading at a dividend yield of 13.3%. Despite the half year 2024 EPS falling from Ksh 28.22 to Ksh 21.36, the interim dividend was retained at Ksh 5. The 24% drop in earnings was attributed to a 10% drop in net revenue, foreign exchange losses from its exports amid a strengthening shilling, and a 700M increase in costs of repaying loans due to the foreign exchange movements. The nicotine pouches issue clearly destabilized the company with capital tied up (the factory investment was reported at Ksh 2.5bn) and human resource that must have been scaled up for this operation. The 19th December 2024 communication to staff on imminent staff reduction exercise to drive efficiencies and optimize operations highlights this fact. With a 2024 EPS of about 43-45, and a policy of distributing 85-90% of earnings, a final dividend of Ksh 35-40 is likely. BAT has retained earnings of over 10Bn which can be tapped into to maintain dividends at similar levels to last financial year. The sale of the nicotine pouches factory machinery should also generate some salvage value of at least 1bn – 1.5bn from this investment). Should it maintain its dividends in the Ksh 45-50, the share should reclaim its true value of about Ksh 450 (10% dividend yield).
Happy Hunting in 2025
KCB: Seems i was spot on for the half year interim dividend of Ksh 2.00 and special dividend of Ksh 2.00 eight months ago. The share price as predicted should also start approaching my target price of Ksh 60-65 within the next four months. Happy Hunting
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Rank: Elder Joined: 7/22/2009 Posts: 7,589
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cnn wrote:MaichBlack wrote:My heavy loading on KCB continues. Finally got my last purchases for the next 3 months or so in yeterday. Been throwing everything I have at KCB.
My final phase of KCB buys will be between November and the release date for FY 2025 results (based purely on cash flow).
Wanted to get all purchases for this phase in before HY results are released because good stuff might come to light affecting the price moving forward. Now waiting for the results! Enjoy the dividend.ksh 2 interim,ksh 2 special dividend. Thank you. Good stuff in deed came to light. I will be sending all those dividends right back in at the right time to earn me more money. I am going to milk the eighth wonder of the world - the power of compounding - till Albert Einstein is proud of me!!! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,589
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stocksmaster wrote:stocksmaster wrote:In the last year and more so the last month, the NSE Equities market has shown recovery from a prolonged slump. As T bills approach single digits returns, smart money has started flowing into the equities market which are still heavily discounted. Several counters have started approaching their true market value but a few still present opportunities for outsized returns. As money exits treasury bills and bonds, it will be seeking equities that can deliver similar returns to the 2024 interest rates of 15-18% (through mainly dividends but also potential capital gains)
The following are my picks for 2025 (in order of priority)
1. KCB (Current Price: Ksh 41.50; Target Price range Ksh 60-65 by Dec 31st 2025); About 50% Upside
Currently the most undervalued bank share, the bank is on course to report a net profit of Ksh 60bn (about Ksh 18 earnings per share) despite havings NPLs worth over 215bn as at 3rd quarter (18.5% of loan portfolio).The dividend policy for KCB is to distribute upto 50% of net earnings. A conservative dividend of 35% of net earnings could mean a dividend of Ksh 6.50 for 2024 (deduct Ksh 1.50 interim dividend for a potential final dividend of Ksh 5.00). It is also in the process of selling National Bank of Kenya, its subsidiary, to Access bank by March 2025. The value of the transaction as at Q3 2024 was 1.25 x 12bn (book value) = Ksh 15bn. By March 2025, the NBK value should be about 16bn, hence about Ksh 5 per KCB share which presents a possibility for a special dividend of about Ksh 2 (if 40% of the sale are distributed). Add half year interim dividend 2025 of about Ksh 1.50 - 2.00 , and this adds up to about 20% in potential dividends in the next 9 months.
The Ksh 215bn NPLs representing 18.5% of loan portfolio while presenting a risk to investment, also provides a major opportunity since a major recovery in this ratio would turbo charge profits for 2025.
2. UMEME (Current Price: Ksh 16.75; Target Price-Concession buy out price of Ksh 20 plus dividends/retained earnings of Ksh 5-10); About 50% upside within the next 90 days.
The 20 year Umeme Concession ends on 28th February 2025 and with the Uganda government having decided not to renew it, are bond by the concession agreement to pay Umeme for all unrecovered investments plus a 5% premium by 31st March 2025. Current estimates of the buy out amount ranges from USD 225M (Uganda Energy PS estimate in early 2024) to 255M (latest Uganda Govt estimate in Oct 2024) to 283M (Umeme Management Estimate). With 1.62bn shares, that works out to between Ksh 18 - 20.5 - 22.70 (Median of about Ksh 20.5). The company after the end of the concession will most likely delist from both the Nairobi and Uganda stocks exchanges. This means distribution of buy out amount and shareholders equity and 2024 earnings to the shareholders. (The company cleared all its long term debt by Dec 2023). Retained earnings as at June 2024 were worth about Ksh 10 per share and translation reserves about Ksh 4.50.As at Half year 2024, total shareholder equity was worth about Ksh 17 per share.
Depending on the direction the company decides to take after the concession lapses on 31st March 2025, the next 90 days could deliver some outsized returns to the shareholders. It is worth noting that any delay in payment by Uganda Govt after March 31st will attract an interest of 10% p.a btw days 30-45; 15% p.a btw days 46-90 days and 20% p.a after day 90 until the amount is settled in full.
It should however be noted that this is a highly speculative 90 day play that has many variables e.g the Auditor General of Uganda whose mandated to audit the Umeme Investments may refuse to recognize some of the investments hence reducing the buy out amount; African politics may come into play although almost a quarter of Umeme is held by the NSSF Uganda; lack of budget allocation to support the buyout (the amount was not captured in the June 2024-2025 budget hence indicating potential delays) etc., potential last minute renewal of the concession but at lower margins for Umeme (the 20% guaranteed returns were one of the issues the GoU had with the agreement and are hoping for a partner that can assure much less for cheaper elec).
3. KENGEN (Current Price: 3.64; Target Price Ksh 5.00); About 40% Upside
KenGen is currently trading at a dividend yield of almost 18%. The government policy that is partially responsible for government trading entities to pay at least 80% of earnings as dividends is still in place upto end of June 2025 and this was incorporated into the performance contracts of the CEOs of these parastatals. The company is also expected to get a windfall of over Ksh 4.1bn by end of 1st half of current financial year from selling about 70% of its carbon credits (the carbon credits amount adds up to almost same amount being paid as dividends for financial year ending June 2024). With stability of the Ksh versus dollar and a more liquid KPLC (paying its debts due to KenGen within their 40 day agreement; KPLC owed KenGen about 17bn as at June 2024 and paid fines for late payments amounting to 710mn for financial year ending June 2024). Shortage of power in Western Kenya has also seen the revival of KenGens Muhoroni Gas Turbines last month which will inject 60MW to the grid. This power purchase agreement with KPLC had expired in June 2023 and the plant had been subsequently shut. In November 2024, the plant has supplied 688,650 kWh in it first month after revival. Projects geared at increasing KenGens power generation capacity are also ongoing and should in the long term increase the electricity generation capacity of the company. It is also engaged in an Africa wide geothermal drilling which is earning the company additional revenue from its leadership in this market niche.
I anticipate at least a dividend of Ksh 0.65 for financial year 2025 which should propel the price towards the Ksh 5.00 – 5.50 by October 2025.
4. BAT (Current Price: Ksh 376; Target Price Ksh 450); About 20% upside
BAT has been heavily penalized by the market following the inability to acquire a license to start production of oral nicotine pouches despite having a factory to manufacture the same since 2019 (5 years old). This has forced the company to sell the machinery (from July 2024) and shelve the nicotine pouches idea.
BAT is currently trading at a dividend yield of 13.3%. Despite the half year 2024 EPS falling from Ksh 28.22 to Ksh 21.36, the interim dividend was retained at Ksh 5. The 24% drop in earnings was attributed to a 10% drop in net revenue, foreign exchange losses from its exports amid a strengthening shilling, and a 700M increase in costs of repaying loans due to the foreign exchange movements. The nicotine pouches issue clearly destabilized the company with capital tied up (the factory investment was reported at Ksh 2.5bn) and human resource that must have been scaled up for this operation. The 19th December 2024 communication to staff on imminent staff reduction exercise to drive efficiencies and optimize operations highlights this fact. With a 2024 EPS of about 43-45, and a policy of distributing 85-90% of earnings, a final dividend of Ksh 35-40 is likely. BAT has retained earnings of over 10Bn which can be tapped into to maintain dividends at similar levels to last financial year. The sale of the nicotine pouches factory machinery should also generate some salvage value of at least 1bn – 1.5bn from this investment). Should it maintain its dividends in the Ksh 45-50, the share should reclaim its true value of about Ksh 450 (10% dividend yield).
Happy Hunting in 2025
KCB: Seems i was spot on for the half year interim dividend of Ksh 2.00 and special dividend of Ksh 2.00 eight months ago. The share price as predicted should also start approaching my target price of Ksh 60-65 within the next four months. Happy Hunting Hats off @Stockmaster as always. Your research and analysis always top notch. And your willingness to share extremely commendable and appreciated. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,589
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Angelica _ann wrote:As a diehard BAT fan, I am happy finally we are back to 420 - 450 range after a long time. Plus 10 bob interim dividend coming in September.
12 months high prints! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Member Joined: 2/15/2010 Posts: 152 Location: Kenya
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jmichi wrote:I greatly admire and appreciate your topnotch analysis of nse stocks. Kindly, I would love to see you analyse kre and insurance firms in general. Much appreciated. I know I'm not the O.G himuselfu but hope this helps; I find it easier to break listed insurers into 4 groups. I only consider dividends and balance sheets. 1.Re-insurers There's one, Kenya Re a consistent dividend payer. Solid balance sheet. No debt. 2.Kenyan domiciled Insurance Holding Groups Jubilee- Consistent dividend payer, with a clear dividend policy. Impeccable balance sheet. Regionally diversified insurance subsidiaries and diversified investments (from fiber optic network to farmers choice) CIC- Mostly consistent dividend payer, solid balance sheet but some debt linked to Kiambu land. Regionally diversified insurance subsidiaries. Britam- Nil dividends in about a decade. Solid balance sheet. Regionally diversified insurance subsidiaries. 3.Majority Foreign Owned Kenyan Insurance Subsidiaries Liberty- Somewhat consistent dividend record. Solid balance sheet. Sanlam- Long dividend draught. Solid, smaller smaller balance sheet with some debt(previous commercial debt paid off by rights proceeds). 4.Kenyan Banks That have Insurance Subsidiaries. NCBA- Newly fully acquired AIG. Consistent dividend payer, Superior dividend yield. Balance sheet is solid. Equity - Has a fast growing 2 year old insurer. Consistent dividend payer. Solid balance sheet. Coop owns a significant portion of CIC and has also lent it a significant amount. Personal opinions Considering current prices; Kenya Re is a buy. Kenyan Domiciled Insurance Holding Groups-Jubilee's balance sheet & management & shareholders respect are unequaled but it's pricey vs dividend yield. CIC- is worth a look, they'll eventually sell the land. Foreign Owned Kenyan Insurance Subsidiaries. Liberty is good value at no more than 12. Sanlam- With the rights issue injection might be good value at no more than 10. Kenyan Banks With Insurance Subsidiaries Historically these beat pure play insurers hands down when it comes to dividend payouts, consistency of profits. Only consider pure play insurers if you already hold these. Also note: 1.Jubilee owns a minority part of Kenya Re. 2.Jubilee, Sanlam & Allianz run a combined general insurance operation in Kenya. 3.To the best of my knowledge the Sanlam entity that does asset management isn't owned by the listed entity.
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Rank: Member Joined: 1/13/2014 Posts: 396 Location: Denmark
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DtheK wrote:jmichi wrote:I greatly admire and appreciate your topnotch analysis of nse stocks. Kindly, I would love to see you analyse kre and insurance firms in general. Much appreciated. I know I'm not the O.G himuselfu but hope this helps; I find it easier to break listed insurers into 4 groups. I only consider dividends and balance sheets. 1.Re-insurers There's one, Kenya Re a consistent dividend payer. Solid balance sheet. No debt. 2.Kenyan domiciled Insurance Holding Groups Jubilee- Consistent dividend payer, with a clear dividend policy. Impeccable balance sheet. Regionally diversified insurance subsidiaries and diversified investments (from fiber optic network to farmers choice) CIC- Mostly consistent dividend payer, solid balance sheet but some debt linked to Kiambu land. Regionally diversified insurance subsidiaries. Britam- Nil dividends in about a decade. Solid balance sheet. Regionally diversified insurance subsidiaries. 3.Majority Foreign Owned Kenyan Insurance Subsidiaries Liberty- Somewhat consistent dividend record. Solid balance sheet. Sanlam- Long dividend draught. Solid, smaller smaller balance sheet with some debt(previous commercial debt paid off by rights proceeds). 4.Kenyan Banks That have Insurance Subsidiaries. NCBA- Newly fully acquired AIG. Consistent dividend payer, Superior dividend yield. Balance sheet is solid. Equity - Has a fast growing 2 year old insurer. Consistent dividend payer. Solid balance sheet. Coop owns a significant portion of CIC and has also lent it a significant amount. Personal opinions Considering current prices; Kenya Re is a buy. Kenyan Domiciled Insurance Holding Groups-Jubilee's balance sheet & management & shareholders respect are unequaled but it's pricey vs dividend yield. CIC- is worth a look, they'll eventually sell the land. Foreign Owned Kenyan Insurance Subsidiaries. Liberty is good value at no more than 12. Sanlam- With the rights issue injection might be good value at no more than 10. Kenyan Banks With Insurance Subsidiaries Historically these beat pure play insurers hands down when it comes to dividend payouts, consistency of profits. Only consider pure play insurers if you already hold these. Also note: 1.Jubilee owns a minority part of Kenya Re. 2.Jubilee, Sanlam & Allianz run a combined general insurance operation in Kenya. 3.To the best of my knowledge the Sanlam entity that does asset management isn't owned by the listed entity. Great insights! Thank you. Seeing is believing
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Playing the Market............. 2025
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