McGill wrote:VituVingiSana wrote:McGill wrote:VituVingiSana wrote:Ericsson wrote:jmichi wrote:Its not a 100% as u state. Nirmally tjere must be a price correction and div is 10% yes. But now the shares are ex bonus..its now 1.4. I would expect ot to be below 1.00 once the bonus shares are loaded. So in actual sense it will be a loss for those who will hold till then esp if the share was bought at 2.8 and above.
Going below ksh.1 means it will have a forward dividend yield of 15%
Closed at 1.40 on Friday.
I await the 1H2024 results but there may be some large losses loading from the flooding and damages from recent riots.
Even if these do not show up in 1H then they will in 2H and 2025 as claims are filed and processed by the insurers and then sent to Kenya Re.
Am also concerned about the net forex losses, they were quite significant in H1 and I think they will be significant in H2. My biggest if is about the payout ratio after the new govt directive. Anyway, the MD said the worst case scenario is them matching 2023fy. Since he knows more than me I will go with that.
Those could be huge esp given the:
- Assets/Income in West Africa
- Assets in Southern Africa
- ZepRe which pays in $
Though some of the FX losses were accounted for by 30th June.
They did not break out Reinsurance Receivables but unless those have improved, they remain in the same hole.
Kenya Re needs to earn a much higher RoE and pay a substantially higher DPR for shareholders to see a decent return.
Just 2 questions. What are your thoughts about the new govt directive concerning dividends (in regards to KNRE) and do you think the current price is a buy?
I thought it was a buy years ago but my views have changed on the firm given GoK control. I am leery of GoK control. When GoK controls a listed firm, there is an inherent deserved discount.
Cons:
- Note that overall insurance firms, in KE, have done poorly even Jubilee has a sub-10% RoE.
- Add GoK control to Kenya Re and you can see my doubts.
- Politics eg IRA forcing KE to pay for the pandemics, etc
Pros:
- It is 1.20 and if it pays 15c, it pays better than T-Bills. Almost T-Bonds.
- There are several significant land cases that will eventually get resolved. They have been written down so is KR loses, the losses are limited but if KR wins the gains are substantial.
There is a lot to be written about Kenya Re but at the end of the day is the Board and Management aligned with shareholders? No.
That said, it is at 1.20 not 5/- so with 15c there is scope for patience as long as the DPS is 15c or better.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett