Centum is trying to be clever in the way it’s managing its risks especially on real estate.

They had the real estate subsidiary take on a bond that works almost similar to securitized mortgages.

The bond they are issuing is a zero coupon bond that is backed by deposits from people who will buy the real estate units in projects they intend to invest in.
Zero coupon means they wont pay anything until bond maturity. At maturity the bondholders will be paid out of the deposits collected from the housing unit sales. In the event that there are insufficient funds to cover bond payments, investors will have to take up housing units.

This means that investors will carry the risk that the projects won’t be completed in time and the risk that the real estate market might perform poorly and Centum might be unable to meet housing units sales targets. So Centum only biggest risk there is reputation risk.

They are also saying they want to keep the holding company balance sheet ‘debt free’ by having subsidiaries take on debt against their own assets. Without guarantees from parent it means that subsidiaries can be closed down without necessarily hurting the parent company,assuming the group does not depend too much on the subsidiary (ies) closed down and that the parent does not try to shift capital around through inter-company debt/dividends.
At group level, debt taken by subsidiaries is still debt carried by the company

CEO said dividend is guaranteed since they have the cash despite being paid less dividend from their private equity portfolio. On the bright side, Isuzu has resumed paying dividends and they are finalizing a number of land sales. They only need Ksh800 million in cash to pay a dividend and as at half year they have 1.7 billion. Since the banks are not paying any dividend next year, I will gladly take a 7% yield from Centum.
Centum has a market Cap 11bn, yet it has 7 bn in pure cash and cash equivalents so the rest of the business less debt is valued at 4bn. It is still a buy for me below 20 despite the heavy exposure in real estate. Real estate will recover at some point in future.

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Share price has overtaken Nation media on it's way down.
There has been heavy trading on the counter for the past one week with daily trades of over a million shares

Like vvs

Nation or Centum?
I would buy the 50mn Centum if I had 800mn sitting around!
Centum is not for the short-termists. This requires shutting out the noise. Project 2024!

Copied and Pasted: Warren Buffett is not just a contrarian investor. He may be what you might call a “business-oriented value investor.” This means he does not purchase any and all stocks just because they are on sale.

As a business-value investor, it is imperative to know when it is time to leave and to be prepared for that perfect opportunity, to be greedy when others are fearful, yet to be greedy for investment with long-term durable economics and rational, honest management.

>>> My notes/analysis.

Centum is "disliked" by some for various reasons.
- Sale of Coca-Cola (NBL, Almasi) but "As a business-value investor, it is imperative to know when it is time to leave and to be prepared for that perfect opportunity"

- Real Estate but this isn't new real estate bought at high prices. Two Rivers, Vipingo, etc were bought at low prices compared to today's (distressed) values. I don't have exact numbers but I think Centum paid (back then) 10mn/acre for Two Rivers and less then 200k/acre for Vipingo. Of course, money had to expended to improve the "raw" land.

I am focused on disposals. They handed over Awali Phase 1. Phase 1 of 1255 Palm is supposed to be handed over in Jan/Feb 2021. So these "profits" will reflect in 2H 2020-2021 results.

Demand for 1255 seems good and they are starting Phase 2. I read that some of the UG properties will be handed over in this FY.

3bn raised to help continue development of raw land and complete ongoing projects instead of slowing down or ceasing construction which creates problems with perception or those who have contracts.

- Amu. The dynamics/market changed. One cannot win them all. Not even Warren Buffett. GoK wanted 5,000MW and now doesn't. 2bn provisioned and its no longer a drag. Banks provision bad loans. Insurance firms provision bad debtors or assets they get after an insurance settlement.

- Cash. CIL (HoldCo) is net cash but has some guarantees for subsidiaries. It can easily pay a dividend (1.20/year = 800mn). Also the interest savings from paying off the loan and bond will be substantial.

- PE Firms. These had a tough year with COVID from Sidian (bad debts), Longhorn (huge drop in sales when schools closed), ACE/Sabis (shutdown), etc. Schools will re-open in Jan and textbooks will be required. GoK may require all kids have their own books and this might be good for Longhorn.
Isuzu should see an uptick once the economy opens up and supply chains are restored. Weaker competitors will have problems.

Longhorn was forced to accelerate the development of online/mobile resources which will benefit them in the future. Dividends to the HoldCo could start in 2021 but more likely in 2022.

If you are in Centum, keep your eye on the prize.
Add more. That's what I am trying to do.
It needs 2-4 years (2024) to get past the elections. Of course, Chupilee could make everything go to hell!

Even Home Afrika started similarly,I hope they don't fall into the same trap

Looking for 800mn in spare change!

Drop in the ocean, I'd expect him to be more aggressive at the current price.
Planning on buying some more at sub 17/= but combination of never ending COVID + BBI & 2022 jitters make me sceptical.