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Tuesday, September 26, 2006

KenGen makes Kshs 3.8 Billion PAT 2005-6

KenGen reported a spectacular rise in profits in 2005-6 over 2004-5.

Year End: 30 June 2006

Sales: KES 14.3 Billion (+30%)

PBT: KES 3.7 Billion (+42%)

PAT:KES 3.8 Billion (+115%)

Taxation: KES 48 Million (-106%) - Apparently, there were huge "tax benefits" that accrued from the listing (tax rate will drop to 25% from 30% in 2006-7) & subsequently the PAT is higher than PBT in 2005-6!

EPS: KES 1.71 (+115%)

Dividend: KES 0.55/share

"These results represent a solid performance from the company. Earnings in 2006 were favourably impacted on by an increase in units sold as well as improvement in operational efficiency," said a statement by managing director Edward Njoroge.

KenGen sold 4,538 kilowatt hours compared to 4,280 last year.(+6%)

"As a newly listed company on the Nairobi Stock Exchange with 30% private shareholding our Corporation tax will reduce from 30 to 25 per cent with effect from the next financial year. This new rate has impacted on the deferred tax liability computation in compliance with International Financial Reporting Standards resulting in very low tax levels this year." per the announcement.

The growth in the economy (+5.8%) seems to be a major contributor to the increased sales (+6%). The rains also benefitted KenGen since hydroelectric production is much cheaper than thermal production.

KenGen indicated it would invest in an additional capacity of 500 megawatts over the next five years to meet rising demand.

KenGen plans their maiden AGM at the Kasarani Gymnasium - I wonder how many shareholders will attend - on November 30 2006.

The Government may sell more shares to the public but there is no timetable but it will probably be AFTER Mumias, KenRe & Telkom/Safaricom.

Opinion/Comments

Don't go gaga over KenGen's profits, yet, until the Annual Report is released. There may be various "non-recurring" items included in the profit.

Nevertheless, there is a strong possibility of ample growth if KPLC can increase its customer base by 500,000 users over the next 5 years. KenGen plans to spend KES 70 Billion over the next 5 years to increase their capacity by 500MW.

  • How will they finance the expansion?
  • Will KPLC be able to market & sell the additional production?
  • The profits will have to rise substantially to enable debt service of an additional 70 Billion!
  • The tax effect will be substantial in 2006-7
  • Will the 60 cent rate hike be effected in 2006-7?

6 comments:

Kudrinketh said...

I'll admit that these results are making me go gaga, and here's why?

1.Oil prices just dropped below $60 per barrel, this should further lower production expenses in the short term.

2.The repricing is inevitable.I think shareholders will pressure the management not to allow additional concessions to KPLC.either that or they face lawsuits for misrepresentation.

3.Pressure on KPLC to sell more units, lest the management get fired. good incentive dont you think?,more units, more sales for kengen.

4.that tax incentive is pretty good.

I invite yall to poke holes into these arguments.and coldtusker, any speculations as to what these " non-recurring" items might be?

bankelele said...

Nice results especialy the tax benefits. Now if only the matter of the KPLC tariff hike could be followed to the letter and the govt stop intervening to prop up KPLC, Kengen propsects will improve greatly

Am also troubled by the story in the East African this week that stockbrokers used many dummy accounts to mop up as many IPO shares of Kengen which they are now offloading.

coldtusker said...

Kudri - The "tax benefits" is the MAIN reason I advocate caution! After the taxes normalise the PAT will reduce by 25%. We need to wait for the Annual Report.

The rest of your points are valid. What about the KES 70 Billion loan?

On the NSE, price & value do not go hand in hand!

Banks - Any responses on your plagiarised story/input on Safaricom?

Kudrinketh said...

coldtusker

I think you got it all twisted on the tax incentive,its not one-time,its for a period of 5 yrs following their listing.

so get used to a 25% PAT for 5 yrs, sounds like a steal to me!

entrepkik said...

Thanks for your prompt reports and forthright opinions on announcements.

Do you know whether TPS and Express have announced 1half results?

And what are the prospects for TPS. Some time ago there was a block offer of over 1m shares at 130 and apparently there was no taker although my broker, well respected for reserach, had indicated, in an opinion to clients, that it will be snapped up by institutions because of illiquidity of the counter and the recent restructuring/expansion as TPSEA. Since then price has been on the downward trend. Could some interested buyer/seller players be bringing it down to make the deal at an appropriate price?

Anonymous said...

@kudrineth

regarding price of oil, i think whe the price is trading @ $70 des not mena that price at the pump or suppply chain wil automatically be bought @ $70 or $60. this price s are prices for example like november deliveries.
so the price of oil in kengens case is really dependenat on wether they have an cative trading department that is able to hedge their prices - i know kenya airways has one that has been able to control or ppredict the cost of fuel

speaking of which kenya/africa is ripe for a futures market what with flactuationg currencies and commodity prices. and with too much money and limited investment opportunities