@All,

Well well, this poses a big dilemma! I am having conflicting perspectives;

1. As a long-term investor in kcb, their previous rights issue only managed to reverse capital gains made on paper! Shud have exited at 32-33! Their dividends r nothing special!
2. On the other hand, @16, it wud be an opportunity to increase holding....but but but, who says there will not be yet another rights issue to raise money to expand into, say the West African mkt - repeating the biennial dilution of the stock value?

3. Just when is the right time to slow down on expansion n reward shareholders?

I think I will exit! I am sure with billions of new shares, i can always get them sub 20 in the next 2yrs!

2.

doing the math KCB will be compelled to translate this rights issue into serious profits since as per my calcualtions if one got into the stock now at 23.5bob and participated in the rights issue at 13.6bob their average buy price will be around 20bob but if KCB were to earn PBT of 9.5billion as they project this year and using a sector P/E ratio of 12.59 the price will only be 23.25 which is lower than current market price....

IMHO any short term players should be running clear of this counter....

Issuing a rights issue will cause the shares to flood the NSE hence cost of the share will come down. i was optimistic that this share was headed in the right direction but now am 50/50.
probably an exit would be the best now then return once the shares flood the market????

..when all is said and done...its all about the money.

share dilution loses special quality any stock would have... scarcity.. ease with which large quantities can be mopped up.. KCB will soon be the Safcom of the finance segment.

Yes it has value..but that value will be unlock-able for a while considering liquidity..

for technical purposes..volumes traded and the demand and supply factors... Equity and coop fair far much better.

Prices likely to be lowest in sector once new shares are in...

Drat!!! Got to leave.

@skylat KCB expect earnings to pass 9billion this year and judging by that alone snd the fact that investors expect rights issue cash to be translated to profit there is not way the price can fall to 13bob...

if it does then we will have an extremely bargain stock for the picking

@Mzee Slykat

You cannot compare 2008 with 2010 because from mid 2008 till early 2010 the market was generally bearish because of Kenya Post Election Crisis / Global Economic melt down so all banking stocks (except of recent speculative NBK due to bonus carrot no dividend) has has not recovered.

With KCB at 31 bob in 2008
BBK was 90 Bob,
Equity 280 bob (28 bob post split)

Most stocks in other sectors are yet to reach their 2008 highs.

Message is clear for KCB :-
Short Term investors .....EXIT
Long Term Investors.......STAY or EXIT

I am on the STAY category so would like to take the rights.

am off for the wkend, by the time i see u again online, we will be talking 18bob down from 23.

Maybe after the dividend pay out in May. Anyone selling below 20 bob now (and lose a 5% dividend) would be out of their mind.

Extract from the business daily today:

“There are also chances that KCB will have difficulty raising that amount of money. I can see many shareholders attempting to sell their rights. They have been disturbing shareholders with rights issues for years now and yet do not show much growth in profitability or share price at the stock exchange. Why can’t they raise the money in another way?” asked the analyst.

There is still a bad taste in the mouth of those who bought KCB rights when it was at Sh25 to Sh30 and must be disappointed that it has hovered roundabout Sh21-23 for over a year.

If all the 1.1 billion shares are issued at the same time, the offer price will be Sh13.64 per share thereby raising total shares to 3.3 billion or by 50 per cent.

In market terms, that is 50 per cent dilution and with a six-month price of Sh21.30, shareholders might expect the price to be around Sh12.

@GG,

Please clarify the source of your info. From the posts I have been reading, KCB would like to raise 15b from 1.1 b rights and that is the basis of making the assertions. I believe business daily: someone has already commended is basis their basis on the same.

I believe the only way they can manage to get people buying the rights is if they price them in such a manner that the average weighted prices i.e the rights and the existing average share price over the last 6 months or whatever the duration has a discount of about 15 percent. else the entire thing will be a big flop