Announcements

Strong investment grade first time ratings are accorded to Centum

Centum Investment Company Limited (“Centum”) has been accorded first time national scale ratings of A-(KE) (single A minus) in the long term and A1-(KE) (single A one minus) in the short term.

Centum is an established Kenyan investment company with a diversity of investment interests across Kenya and the East African region. In this regard, the Group reflects clearly defined business structures and a well enunciated business strategy. This investment strategy centres around the acquisition of stakes in private and public businesses that reflect industry leadership or strong competitive advantages, with the Group seeking to invest, extract value (through business re-engineering and other efficiency initiatives) and thereafter seek a profitable exit.

This has seen Centum report robust growth of the asset base, without the substantial usage of debt funding. Accordingly, at FYE12 the Group reported a strongly diversified asset base, including a large portfolio of quoted equities and other marketable securities (bonds and cash). Such assets facilitate strong recurring cash generation through dividend and interest income, while cash flows are also supplemented by trading of investments.

Given the above, Centum’s debt serviceability has been comfortable, with low levels of gearing and strong liquidity historically reported. However, with the acquisition of investment properties earmarked for development, a marked rise in gearing is anticipated. Specifically, Centum intends to raise KShs4bn-KShs5bn in fresh borrowings through an unsecured bond issue, with the proceeds to be applied towards a real estate development and the acquisition of several private equity interests. Although expected to be mitigated somewhat by higher private equity dividends, this will see a sharp rise in gearing and diminished debt serviceability in the medium term. Thereafter, the completion and commercialisation of real estate investments is expected to see credit protection metrics improve considerably.

Despite the anticipated rise in gearing, and Centum’s relative lack of experience in the real estate segment, GCR considers the Group’s core private equity and quoted investments to be sufficient to support debt serviceability on a standalone basis. Comfort is also taken from the long term nature of the debt to be raised, which is expected to allow ample time for the completion of the first phase of real estate development prior to principal redemption.

Richard Hoffman

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