The share eventually closed at Kshs. 23.50. This represents a 53% drop from the introductory price of Kshs. 50.00 on July 14th 2011. Soon after the listing, the share touched a high of Kshs. 60.00, but has been on a swift downward spiral since then.
No doubt the company’s decision to go on with the listing at a Price to Earnings ratio of 38 due to what they termed “good prospects” while other NSE-listed investment companies were going at much lower multiples, and granted, also had good if not greater prospects, aided in the drop.
In light of this development, I undertook a review of the company and its operations
Through its various divisions, the company holds stakes in different companies:
Consumer Division
Chai Bora: This subsidiary of TCL is a market leader in blending, packaging and marketing tea in Tanzania, controlling 60% of the market
Power Infrastructure Division
This division is the mainstay of the company and indeed contributed 81% of turnover in 2010.
East African Cables (Owns 63% stake): Acquired in 2004 from Sameer Group. In its Half Year 2011 results, the cable maker rebounded from a 57 Million loss to post a 172.3 Million in Profit After Tax (PAT)
Kewberg Cables (100%): Acquired in 2007
Tanelec Limited (70%): Tanzanian transformer manufacturer. Acquired stake in 2007
Cableres du Congo (100%): Acquired in 2010
Special Engineering Division
Avery East Africa: Incorporated in 1970, it focused on the supply, manufacture, maintenance and repair of weighting scales. It has though diversified into dealing with inkjet coding equipment and has now ventured into the energy sector where the company is actively supplying power generation equipment
In December 2011 during an Extraordinary General Meeting, TCL shareholders approved an investment by the company in Civicon Group Limited and its affiliates. Civicon deals in projects involving heavy transport, cranage, piping, tanks, steel erections and road building across Africa and the Middle East
This, the Chief Executive Officer, Gachao Kiuna, expects to even out revenue across the divisions.
Transport Infrastructure Division
Through this division TCL owns 34% of Rift Valley Railways Investments (RVRI) which has a 25 year concession to operate exclusively railway services in Kenya and Uganda
In July 2011, Citadel Capital, which is the majority shareholder in RVR, reported that RVRI achieved a positive EBITDA for the first time since it invested in it. Citadel said that for the month of June 2011, RVRI had an EBITDA of Kshs. 57.28 Million
After receiving a financing package from a consortium of lenders, RVRI embarked on a $287 Million capital expenditure to increase volumes and revenues significantly over the next 5 years.
TransCentury also has holdings in several financial services firms, chief of which is a 10.7% stake in Development Bank of Kenya. Other investments include an array of international Private Equity firms
TCL plans to join the Real Estate bandwagon. It owns 100% of a prime 6 acre plot in Karen and intends to develop it into a 24,000 square metres lifestyle mall with commercial office space
The company posted a Kshs. 54 Million Profit After Tax for its half year ended 30th June 2011. The group’s peak year in terms of profitability for the last 5 years was a net profit of Kshs. 1.17 Billion in 2007.
In 2010, the company had a PAT of Kshs. 468 Million. The company will however have to produce a stellar 2nd half performance to match those results.
Management though had indicated its intentions to ramp up production further in the 2nd half as key capacity expansion projects in Kenya, Tanzania and South Africa came to fruition
TCL had listed 267,038,090 shares but under its Convertible Bond Programme (CBP), it listed an additional 6,912,194 shares taking the total number of listed shares to 273,950,284.
144,008,422 ordinary shares still remain reserved for the CBP
Whether the share will hold at current prices or go much lower will depend on the set of its 2011 second half performance.
TransCentury C.E.O Gachao Kiuna was featured alongside his Centum counterpart James Mworia on Forbes’ 10 youngest power men in Africa
what is your take on individual investment in this company?? do you think its worth it?
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