Blog Archive

Friday, March 06, 2009

KQ - An Update

I spoke too soon...

My blogpost on 24 Feb 2009

KQ's share price has tumbled further since I posted the above. At 12.38 pm on 6 Mar 2009 KQ is trading at Kes 17.25 (though the trading is very thin)...

Did I miss anything on my blog post that accounts for the additional decline?

At this point I think KQ should close up shop... to protect the shareholders!

- Sell the planes while there is a market. Emirates & Ethiopian are still buying planes. Perhaps they would be interested in immediate delivery of the newer planes?

- Cancel or transfer leases of the leased planes.

- Sell the older planes to myriad African 'matatu' airlines.

- Sell the routes (if there is value to be gained) &/or landing slots to Emirates, BA, Virgin, KLM or Air Uganda.

- Cancel (or sell/transfer) all plane orders to get back the cash from down-payments/deposits.

- Use the above proceeds to pay off all debtors.

- Close offices & but sell the 'marketing machine' to another airline.

- Take the remaining cash & distribute to shareholders.

I think the above will yield enough cash to pay each shareholder more than 45/- which is far better than the current price realisation!

OR just sell the entire airline to Emirates or Qatar or AF-KLM who will get the enviable & profitable routes as well trained staff & ready to fly planes in one fell swoop at a far lower cost than a de novo set-up.

6 comments:

Anonymous said...

my my my I can not believe this...! what!?

MainaT said...

CT-Iknow you've probably touched a couple of cold ones.
Otherwise, I know, you know KQ is still a viable stock.

coldtusker said...

At this point in time... my thoughts are that if I had Gordon Gekko's cash, I would buy KQ & split it up for better value...

KQ is valued at Kes 8bn... In my view, the cash (per 30 Sep) is Kes 10bn... so you can buy the entire firm at less than it's cash value!

Of course, the trades are very thin so there are few substantial sellers though also no significant buyers!

Anonymous said...

hi,coldtusker,good analysis here!could you please help me out with where you got this data and also some hints on whether and why you think that british airways can acquire kenya airways and if the existence of klm on the business would be an opportunty or threat....was given a task to justify chpoosing kenya airways as a possible acquisition target..my mail ad is barbienumiii@yahoo.com,,,,please i will need your response before the 14th of march,will be very happy to rub minds with you on this!

Anonymous said...

i did not come from a business background so i'm struggling a bit on ur interpretation of the financial peformances and sources,,its me Barbie,sent the previous comment.

Anonymous said...

One could similarly have argued that when Citigroup stock just over 1 week ago went below $1.00 it should closed shop since its market cap was $5bn, roughly one week later it now has a market cap of $8bn and $2 trillion in assets some of which ofcourse are toxic assets but even were it $500m in toxic assets it would still have assets worth $1.5 trillion. These are extraordinary times where listing prices make no sense. Is Citigroup really worth $8bn? is KQ worth a mere $100m ? any shareholder not engaged in speculative happy go lucky trading would not vote to endorse such a measly take over price. Not when KQ has assets of roughly about Ksh 80bn or US$1bn. One could always throw liabilities into the equation but if thats how public companies were disposed of based on share price and extraordinary price movements that affect all other stocks, there would be very few left standing. A smart buyer could always strategize a behind the scenes take over eg how Diageo got 51% of EABL.