This week, Stanlib released the results of the Fahari REIT IPO offer that was launched in October.
They had aimed to raise between Kshs 2.6 billion and Kshs, 12.5 billion, but Kenya’s first REIT grossed Kshs 3.6 billion (29% uptake) – after expenses of Kshs 174 million, and netted Kshs 3.44 billion.
East Africa institutions (QII) applied for and received 105 million units worth Kshs 2.1 billion (58%), foreign investors applied for and got 45 million units worth Kshs 899 million (25%), and East African retail investors applied for and received 30.8 million units worth Kshs 617 million (17%).
The allocation policy in the event of an over-subscription was to be for 55% for QII, retail would get 25%, and foreign investors 20%. But it’s not clear if the Kshs 1.5 billion ($15M investment by the IFC) committed has been factored in, or if it will come later.
The low uptake would be considered disappointing but for a few factors. First REIT’s are a new exotic product at the Nairobi Securities Exchange (who are also planning to roll out derivatives) and REIT returns are not widely understood by investors. Second, this is a time of high interest rates for competing government securities that are still wildly oversubscribed, and third is that investors may still have overhang from the Imperial Bank shut down – which may continue to affect subsequent attempts to raise cash from the public – such as from company rights issues or commercial bank bonds.
Stanlib are expected to use the funds to complete the purchase of a Nairobi mall
EDIT: The IFC ended up investing $6.7 million (Sh684 million) to match the other investors, which is less than half the $15 million (Sh1.53 billion) it was proposing to invest in Stanlib Investment Fahari Income-Reit. (Via Business Daily)
The Kenya government just announced a $600 million 2 year syndicated loan that will have Citi, Standard Bank and Standard Chartered Bank as bookrunners and lead arrangers.
But as there’s concern of the ballooning government debt levels, is it time to turn to other sources of funding? Some have suggested the government sell off shares in companies it has such as Safaricom.
An example comes from Japan where their government is about to have what’s expected to be the largest IPO of 2015. According to this WSJ article;
- In addition to running 24,000 post office branches, parent company Japan Post Holdings operates Japan Post Insurance, the country’s largest insurer–and Japan Post Bank–one of the world’s biggest banks by deposits, with $1.67 trillion.
- The Japanese government is raising nearly $12 billion from the sale of 11% of three entities – its postal, banking and insurance units.
- Most of the money raised from the sales will be used to help finance recovery efforts after the 2011 earthquake and tsunami.
- 80% of the shares in Japan Post Holdings will go to domestic investors, while the remaining 20% are earmarked for international investors.
Bralirwa (Rwanda) ↑
Diamond Trust Bank ↑
ICDCI (Centum) ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↓
Stanbic (Uganda) ↓
- Comparing the basket to one year ago, the portfolio, excluding new shares, is up 22% since May 2014 while the Nairobi Shares Exchange main index is up 5% over the same period.
- Best Performer: Centum (up 36% in 3 months), KCB 23%
- Worst Performer: Kenya Airways (down 15% in 3 months), Kenol -8%
- In: NSE
- Out: Barclays, Equity, Portland Cement
- Increase: Diamond Trust, Centum, Kenya Airways
- Decrease: None
- Unexpected gains/losses: Centum’s endless deal making.
Privatizations to be concluded by the Kenya Government by June 2013 include:
- The Industrial & Development Corporation (ICDC) will sell 26% of Kenya Wine Agencies Limited (KWAL) to Distell of South Africa and 4% to employees.
- The Kenya Tourist Development Corporation (KTDC) will sell 40% of the 287-room Hilton Hotel, 34% of 389-room Intercontinental Hotel (both in Nairobi) and 39% of Mountain Lodge which is located in Nyeri and managed by TPS Serena, to fellow shareholders.
No IPO’s will result, but the remaining shares in KWAL may be sold to the public within two to four years if their performance improves.