Wazua
»
Investor
»
Stocks
»
Time to play the Market......2024
Rank: Chief Joined: 1/3/2007 Posts: 18,095 Location: Nairobi
|
DTB's 1Q-3Q looks good and then they have a nasty surprise in 4Q. For the serious investors, look at DTB's 3Q and compare to FY results from 2020-2023. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
|
|
|
Rank: Veteran Joined: 8/10/2014 Posts: 966 Location: Kenya
|
watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October.
|
|
|
Rank: Member Joined: 9/11/2015 Posts: 244 Location: Thika
|
DTB has never recovered to 2019 levels. COVID did it in. That is a big red flag. The company still hasn't surpassed its 2019 PBT to this date. 2018 PBT - 11 billion 2019 PBT - 11.3 billion 2023 PBT - 9 billion Since men have learned to shoot without missing, I have learned to fly without perching
|
|
|
Rank: Chief Joined: 1/3/2007 Posts: 18,095 Location: Nairobi
|
Jon Jones wrote:DTB has never recovered to 2019 levels. COVID did it in. That is a big red flag. The company still hasn't surpassed its 2019 PBT to this date.
2018 PBT - 11 billion
2019 PBT - 11.3 billion
2023 PBT - 9 billion
 They might finally [after 5 years] barely squeak past 11.3bn from 2019 but in real terms, they have fallen way behind! I think they were not taking proper NPLs and Provisions before COVID and then were forced by COVID and post-COVID events to start taking provisions. For the past 4 years 2020-2023, DTB makes HUGE provisions in Q4. I believe they are slowly trying to catch up to the provisions they should have taken before COVID. I do not know what they do not take the provisions in one shot. Group PBT was 4bn for Q1 but it includes NCI and then there is Q4 looming. I estimate PBT will end up at 12-13bn if the country doesn't go to the dogs in 2024. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
|
|
|
Rank: Member Joined: 9/11/2015 Posts: 244 Location: Thika
|
VituVingiSana wrote:Jon Jones wrote:DTB has never recovered to 2019 levels. COVID did it in. That is a big red flag. The company still hasn't surpassed its 2019 PBT to this date.
2018 PBT - 11 billion
2019 PBT - 11.3 billion
2023 PBT - 9 billion
They might finally [after 5 years] barely squeak past 11.3bn from 2019 but in real terms, they have fallen way behind! I think they were not taking proper NPLs and Provisions before COVID and then were forced by COVID and post-COVID events to start taking provisions. For the past 4 years 2020-2023, DTB makes HUGE provisions in Q4. I believe they are slowly trying to catch up to the provisions they should have taken before COVID. I do not know what they do not take the provisions in one shot. Group PBT was 4bn for Q1 but it includes NCI and then there is Q4 looming. I estimate PBT will end up at 12-13bn if the country doesn't go to the dogs in 2024. The local market is saturated with banks. It was sad seeing DTB expanding locally when the local party is already over. In my view, they should have used that cash to expand to DRC. No due diligence needed. Equity and KCB are already enjoying success there. Banking money is in DRC not Kenya. Any local bank without exposure to DRC will inevitably fall behind. The local banking bonanza is officially over. Very few Kenyans are unbanked these days. Since men have learned to shoot without missing, I have learned to fly without perching
|
|
|
Rank: Member Joined: 9/26/2006 Posts: 401 Location: CENTRAL PROVINCE
|
watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting
|
|
|
Rank: Elder Joined: 12/4/2009 Posts: 10,671 Location: NAIROBI
|
stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
|
|
|
Rank: Veteran Joined: 8/10/2014 Posts: 966 Location: Kenya
|
Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen?
|
|
|
Rank: Member Joined: 9/26/2006 Posts: 401 Location: CENTRAL PROVINCE
|
watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting.
|
|
|
Rank: Veteran Joined: 8/10/2014 Posts: 966 Location: Kenya
|
stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash.
|
|
|
Rank: Member Joined: 9/26/2006 Posts: 401 Location: CENTRAL PROVINCE
|
watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting
|
|
|
Rank: Member Joined: 9/26/2006 Posts: 401 Location: CENTRAL PROVINCE
|
stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting.
|
|
|
Rank: Veteran Joined: 8/10/2014 Posts: 966 Location: Kenya
|
stocksmaster wrote:stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting. Why I think the impact may be very minimal 1. For the current power producers to sell independently, they have to break the existing PPAs and Kenya Power will no longer have to pay them capacity charges. 2. Kenya Power has the advantage of infrastructure and scale of different categories of customers which new guys will struggle to get. 3. Who wants the headache of billing & collections when you can just collect easy capacity charges + power sales in dollars for 20 years. KPLC spends so many billions in provisions each year because of this. 4. The rules bar private distributors from connecting power consumers with an existing contract with Kenya Power. Hard to scale with such rules 5. KPLC has govt backing so gets priority in things like Last Mile Funding hence faster expansion. 6. If generators can come in and supply without any restrictive PPA, its an advantage to Kenya Power since they will only pay for what they consume rather than have additional capacity charges to pay for idle capacity. 7. For FY25 & FY26 lower retail tariffs will decrease revenue & margins. The only mitigation is growth in consumption & reduction of losses. It's easier to make estimates for those two years because EPRA already gazetted the tariffs. Past that its unknown what madness the govt will come up with in an election year.
|
|
|
Rank: Elder Joined: 12/4/2009 Posts: 10,671 Location: NAIROBI
|
stocksmaster wrote:stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting. Direct power sales to consumers not happening any time soon. Proceeds from disposal of NBK will be used by KCB as the seed money for venturing to Ethiopia. Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
|
|
|
Rank: Member Joined: 2/15/2010 Posts: 126 Location: Kenya
|
Ericsson wrote:stocksmaster wrote:stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting. Direct power sales to consumers not happening any time soon. Proceeds from disposal of NBK will be used by KCB as the seed money for venturing to Ethiopia. KCB is a solid play, could easily give 25% return. Currently trading at a P.E of 2.34 while it's peers NCBA & Equity are above 3.3. Even if NBK sale were to fail (Remember Access' bid for Sidian) NBK is now profitable so no pain. Last I checked Ethiopia only allowed 30% foreign holding in banks, don't think KCB would be too keen to be a minority. A final 3 Shs DPS, to bring total to 4.5 would be 10%+ return on dividend alone. Even assuming a modest 20% growth in EPS, and DPS in tandem annually there's plenty going for it.
|
|
|
Rank: Member Joined: 2/15/2010 Posts: 126 Location: Kenya
|
Also worth a look could be Carbacid.
If Linde sale of BOC at 65 goes through, that's a steal regardless of minority shareholders holding out.
Significant holding of T-Bills and Bonds, rates are high.
They hold about 17% of Tanzania Oxygen, it is in expansion mode also possible wind fall next two years due to supply to EACOP project.
Currently not KCB level dirt cheap but there's value.
Big up VVS for highlighting this one.
|
|
|
Rank: Chief Joined: 1/3/2007 Posts: 18,095 Location: Nairobi
|
DtheK wrote:Also worth a look could be Carbacid.
If Linde sale of BOC at 65 goes through, that's a steal regardless of minority shareholders holding out.
Significant holding of T-Bills and Bonds, rates are high.
They hold about 17% of Tanzania Oxygen, it is in expansion mode also possible wind fall next two years due to supply to EACOP project.
Currently not KCB level dirt cheap but there's value.
Big up VVS for highlighting this one. CARB has more than 2x in price since I started adding more but as you say it has a long runway. I also got some dividends as a sweetener. 1) They chose to install solar power generation to reduce problems with KPLC's supply. Savings are expected. 2) They are trying to expand the use cases for CO2. https://www.coldjet.com/...automotive-restoration/
There is a Kenyan firm that offers this. If I find it, I will try it out. 3) They acquired a new fleet of tankers to export CO2 to EAC. That is a specialized and expensive commitment that gives them an edge over the competition. 4) BOC, at 65, will be icing on the cake. It will eliminate the interest income [=lower dividends at first] as they will have to sell their T-Bills and Bonds but BOC produces cash. 5) CARB will likely have a leaner management team at BOC. Savings. 6) Synergy is a term folks love to use. I actually see it happening given the nature of their products. A salesperson can sell all the gases. They can source supplies from the same Supplier for tanks, etc. THOUGH I expect a REDUCTION in DPS for FY2025 if CARB buys BOC [partially or full] given the need to integrate the systems and people as well as "loss" of interest income. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
|
|
|
Rank: Member Joined: 12/11/2006 Posts: 884
|
What do you guys 👦 think 🤔 of kakuzi. It's on my radar. Trying to do a fundamental analysis of kakuzi “Invest in yourself. Your career is the engine of your wealth.”
|
|
|
Rank: Elder Joined: 12/4/2009 Posts: 10,671 Location: NAIROBI
|
DtheK wrote:Ericsson wrote:stocksmaster wrote:stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting. Direct power sales to consumers not happening any time soon. Proceeds from disposal of NBK will be used by KCB as the seed money for venturing to Ethiopia. KCB is a solid play, could easily give 25% return. Currently trading at a P.E of 2.34 while it's peers NCBA & Equity are above 3.3. Even if NBK sale were to fail (Remember Access' bid for Sidian) NBK is now profitable so no pain. Last I checked Ethiopia only allowed 30% foreign holding in banks, don't think KCB would be too keen to be a minority. A final 3 Shs DPS, to bring total to 4.5 would be 10%+ return on dividend alone. Even assuming a modest 20% growth in EPS, and DPS in tandem annually there's plenty going for it. Yes its 40% foreign shareholding,that law looks likely to be ammended to allow majority shareholding by foreign banks;IMF reforms pressure. Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
|
|
|
Rank: Member Joined: 9/26/2006 Posts: 401 Location: CENTRAL PROVINCE
|
DtheK wrote:Ericsson wrote:stocksmaster wrote:stocksmaster wrote:watesh wrote:stocksmaster wrote:watesh wrote:Ericsson wrote:stocksmaster wrote:watesh wrote:watesh wrote:Let me join in and share mine
Key Play For 2024
Kenya Power
The stock that everyone loves to hate.
FY23 EPS: (1.64)
Current Share Price: 1.6
P/E rato: NIL
Dividend pay out ratio: NIL
Tail winds
1.New tariffs – Average charge per unit will be up by at least 40% (consumption charge excluding FCC,FERFA,IA etc) this goes directly to KPLC. Margins doubled at half year as compared to the 2022 election tariff. 2nd half % growth will be lower since new tariffs commenced on April.
2. EPRA approved recovery of 6.5bn for tariff cut extension. Half of it will be in FY24 so that’s an extra 3.2bn
3. Heavy recovery of forex charges – In FY23 there was a 5bn charge in the cost of sales related to unrealized forex costs that wasn’t recovered due to lack of dollars for payment. KP had to eat up the cost. Currently in FY24, H2 forex recoveries as of April are already 40% higher than H1 indicating heavy recoveries in H2.
4. $/Ksh rate – If by June 30th the rate of dollar to ksh sticks to 140 and below, there will be very little unrealized for losses for the year. Assuming costs don’t skyrocket and gross profit at H2 is similar to H1, EPS should be approx 5 when rate is at 150, 3 when at 160 and sinks into losses past 170.
5. Cashflows – For the past 2 financial years KP has had really amazing cashflows. Now sitting at almost 20bn as at Dec 2023. I expect at least 2bn in interest income
6. Transfer of assets to Ketraco – KP CEO & CFO revealed they rarely revalue their assets eg land. Hence valuations are very highly muted. The transfer wipes out 80bn in debt. Commercial debt stands at 36bn. I wonder if this will trigger a forex loss recovery that has accumulated to over ksh20bn. Either way less interest charges and unrealized forex loss charge.
7. Good rains – From November to date, the more margin rich hydro power is being dispatched over thermal. There is more curtailment of wind & geothermal in favor of hydro. Wind is low margin.
8. Debt recovery – Defaults are over 35bn and there was a provisions charge of 2bn. A tender was issued in Feb for this. Each billion counts in the bottom line.
9. New management – New board, new ceo, more minority shareholder representation. The stalemate is over and things can get moving.
10. Presidential directive – All commercial state corporations should provide 80% of profit after tax for payment of dividend. It’s a long shot but if KP even issues something small, share price will skyrocket. CFO revealed the new board was asking him to budget something for minority shareholders.
11. No major power plant – No jump in capacity charges which are KP’s biggest COS charge.
12. IMF is watching like a hawk
Headwinds
1.ksh – each drop means added costs
2. Loans repayments – Biggest consumer of cash. Moratorium from govt is expiring
3. Government – Any directive can sink the ship
4. Procurement theft – This is where the biggest leakage is. Major projects = major theft. Currently, we have meters and more last mile.
5. Capital gains tax – Transferring assets to Ketraco may trigger a huge capital gains tax.
6. Negative working capital - its shrinking but just doesn't look good on the company.
7. New debt from world bank $300m interest free. It will ease cashflow pains but more unrealized forex losses again.
My target price is 3+ by June 2025 but this is highly dependent on the performance of the ksh. I will jump ship past 170. My current cost basis is 1.55, a price it has stuck to since the onset of the pandemic. So the downside risk is kind of muted. Not planning to hold long term because power utility growth is just 3 - 5% annually
Please criticize my overly optimistic view.
Small update on this: 30th June (date of financial year end). Shilling closed at 130 which means some of the unrealized foreign exchange losses incurred in H1 have been reversed (H1 opened at 140 and closed at 156 as of Dec 31st). Out of the 15 billion charge, around 3bn should be interest charge and others. Without that unrealized forex charge, H1 PBT should be in the range of 10 - 12.5bn. H2 forex charge recoveries were cumulatively approx 60% higher than h1 despite the appreciation of the ksh and heavy rains in Nov, Dec, March, April and May. The extra 10bob appreciation of the ksh means Kenya Power has some unrealized forex gains. However, assuming they book it as a below the line item hence doesn't affect the PBT, I expect PBT for the full year to hit 20 - 25bn (I have also assumed H1 performance is = to H2). Hence PAT of ksh14 - ksh17.5 and EPS of approx 7 - 8.75 for FY24. See you at end of October. https://www.businessdail...ance-of-profits-4700410
@Watesh is onto something. If KPLC makes the minimum predicted Ksh 7 and its board has to obey the idiotic 80% rule that is now embedded as a performance contract metric for state parastatals CEOs, then this share will be on fire. Even a conservative Ksh 1 (which is 14% payout) would push this share to at least around Ksh 4. Happy Hunting KPLC is exempted from the 80% dividend rule. Hmmm...interesting. I haven't come across this info on exemption anywhere. National Treasury Circular No.2/2024 just gives a blanket statement for all commercial state corporations. What about Kengen? Treasury Circular No.2/2024 seems to have no exclusions on the 80% rule....unless the exemption was provided for in the KPLC CEO performance contract. https://www.treasury.go.ke/circulars/
The GM Finance and the KPLC MD seem to indicate that the KPLC shareholders are in for good tidings via possible dividends after half a decade wait: https://youtu.be/V5dB_OL0qDA?si=FfS-349b3HJltFkn
https://youtu.be/gFvwf_KYsLs?si=kZ6AcDmVQi150Vsm
If KPLC is able to restructure it's balance sheet (by Dec 2024 as mandated by IMF) by transfering the 90% foreign denominated loans to Ketraco as it transfers equivalent assets, KPLC is a Ksh 20bn PAT entity (Ksh 10 EPS)..... Happy Hunting. CFO did state the new board asked him to budget for a dividend. Surely, they can just retain all the profits and payout the interest income from the 20bn cash. One thing i noted from Kenya Power is their cashflows have been solid since FY21. They paid out all the expensive overdrafts and their borrowing payments are much higher than proceeds from borrowing. Net cash positive mainly from internally generated cash. @Watesh - KPLC (and KenGen) on fire. How high KPLC goes will largely depend on the dividend after 6 years dividend drought and the balance sheet restructuring. Happy Hunting KPLC share price seems to have found stability at Ksh 3.50 as market awaits end of year results release in the next 2-3 weeks. Dividends of Ksh 1 and above should push it past Ksh 4 which will be a good time to exit since from 2025, it seems it will have competitors (end of monopoly) including direct power sales to consumers by energy generators including KenGen. Next short term play could be KCB. The sale of NBK to Access Bank by Dec 2024 means KCB will book about Ksh 17bn ( projections from KCB half year financial statements), about Ksh 5.30 per KCB share. This may stimulate a special dividend from this one off transaction. The bank is also on course to record at least 55bn net profit for 2024 (Ksh 17 per share),.which should at least generate another Ksh 3 ordinary final dividend. Happy Hunting. Direct power sales to consumers not happening any time soon. Proceeds from disposal of NBK will be used by KCB as the seed money for venturing to Ethiopia. KCB is a solid play, could easily give 25% return. Currently trading at a P.E of 2.34 while it's peers NCBA & Equity are above 3.3. Even if NBK sale were to fail (Remember Access' bid for Sidian) NBK is now profitable so no pain. Last I checked Ethiopia only allowed 30% foreign holding in banks, don't think KCB would be too keen to be a minority. A final 3 Shs DPS, to bring total to 4.5 would be 10%+ return on dividend alone. Even assuming a modest 20% growth in EPS, and DPS in tandem annually there's plenty going for it. KCB is up about 10% so far since this post 12 days ago....It still has legs to propel it further for another 10% capital gain. DTB is the next vehicle for a quick 10-15% capital gains....seems to be edging up slowly for the last few days. Happy hunting.
|
|
|
Wazua
»
Investor
»
Stocks
»
Time to play the Market......2024
Forum Jump
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.
|