Blog Archive

Sunday, February 04, 2007

What options for HFCK?

HFCK announced they intend to do a Rights Issue but the details will be released later on as to the:
  • Number of shares
  • Price
  • Timing
IMHO, I do not think HFCK will survive in its current form. The market for mortgage financing is under pressure from better funded competitors including:
  • Savings & Loan (KCB)
  • BBK
  • SCBK
  • I&M
Therefore my take is that the following will happen during the Rights:
  • CDC/Actis will take up their Rights
  • Transcentury (or some other group) will buy Rights from the Market
  • GOK will sell its Rights. A politically connected group like TCG will use D&B to effect this trade at the right time under everyones noses.
After the Rights Issue is over, then the following scenarios will take place by Dec 2008:
  • S&L bids for a takeover of HFCK for cash &/or KCB stock
  • TCG buys a controlling interest through purchases on the NSE & the Rights Shares.
  • An alternate group follows the strategy above
  • A smaller bank e.g. Equity or Stanbic offers cash &/or stock
Whoever buys HFCK buys a strong customer base for mortgages. In addition, HFCK has branches all over the country & can ramp up production with a strong(er) parent.

Nevertheless, all said & done... HFCK is in play!


pesa tu said...

Agreed HFCK cant survive in its current form.Since, even if they had the money.Its competitiors can replicate any innovation faster and better than it.
HFCK will have to merge/convert to a full house banking outfit to survive.
The only question is when

MainaT said...

Both, agreed fully-i think CDC will use the rights issue to dilute their holding. I'd favor Equity for the management capability, however I also foresee the following scenario. Ireri gets hired as the new KCB CEO- a long shot i know. On joining he then engineers a merger of S&L with HFCK.

Riba Capital said...

Good foresight.
TCG had their opportunity but CDC and other players got greedy as the share price started to rise.
With the rights issue, same as DTK where HAbib took up most of them, there is a real possibility of a third party getting in on the cheap and shaking the shareholder structure from inside.

** CT u owe me a link here**

coldtusker said...

Pesa - True dat! They have a banking license. EABS merged with Akiba.

mainat - I think CDC will take up their Rights then sell the shares if they want to exit.

Riba - I had mentioned a Rights in an earlier comment on Banks blog... no inside info... just logical conclusion!

Pole... link coming right up!

Anonymous said...

This is one stock i've always wanted to dispose but since last year having bought at Ksh. 15 before the euphoria created by Transcentury take over. With a Rights issues in the 2nd quarter of 2007 I hope it will do better and will hold it a bit longer.