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Centum Investment Co. Ltd Unaudited Half Year Results 30 September 2016

Centum 1H17 EPS up 0.4%y/y to KES 2.57; NAV per share up 17.3%y/y to KES 61.12
Centum has announced 1H17 results marking a 0.4%y/y growth in EPS to 2.57. PBT was up 22.8%y/y with a higher effective tax leading PAT up just 7.9%y/y. The rise in PBT was mainly due to the consolidation of Longhorn Publishers which the company gained control in May 2016 and a 25%y/y decline in finance costs (linked to reduced foreign exchange losses on USD loans as well as capitalization of interest during construction for real estate projects). Total borrowings stood at KES 13.97bn. Overall, gearing ratio rose to 29.2% compared to 16.7% in FY16. Share from profit from associates rose 79.8%y/y. During the period, the company’s subsidiary (Almasi Beverages) installed a new PET line and increased distribution network assets at a cost of KES 1.7bn while KES 3bn was spent on ongoing real estate projects. Going by the last closing price, Centum is trading at a 32.9% discount to NAV. Management has highlighted share buy back as a potential option that could be used in future.
Vipingo real estate project provided a key uplift in the numbers, with the value per acre at a modest KES 300,000 and with planning permission for an industrial park already received. Construction of phase 1 of the project is expected in first quarter of 2017 – with some off-takers already identified. Vipingo is expected to be a low cost manufacturing area (potentially an EPZ zone), with utilities such as water, power, roads, electricity supply guaranteed by the developer. The company started generating revenue from its agricultural division on a small scale from June 2016. A major expansion is expected, with the company planning to set up an industrial scale operation on some 14,000 acres about to be acquired. One of the areas targeted is poultry farming, with feed production also planned in the operation.
The launch of the flagship Two Rivers Mall was moved to February 2017, over a year since the initial target launch date. Management noted that it had already attracted 100 tenants who were fitting, and plan to open with a target of 140. On the controversial Amu Coal Power plant, Centum expressed optimism that it would get a generating license from the Energy Regulatory Commission, citing success of key milestone such as signing of the Power Purchase Agreement, National Environment Management Authority license and land lease agreement from the LAPSSET Corridor Development Authority. Mr Donald Kaberuka was also named as the new chairman of the board. He was formerly the president and chairman of the Africa Development Bank, a position he held until 2015. He has among other positions also been Minister for Finance in Rwanda. (Company filing, Standard Investment Bank)

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