Kenya Power offices .file Kenya Power share price at the Nairobi Securities Exchange has dropped by over 60 per cent in one year, worsened by alleged corruption scandals that saw senior managers arraigned in court last July.
The power distributor’s share at the bourse closed the week at Sh4.58 having shed Sh7.15 since August last year when it touched a high of Sh12.
“Kenya Power share price is one of the biggest undervaluation phenomena of our times. It is down over 60 per cent now, just a nudge away from Sh4.50. The share is actually trading at just 13 per cent of its book value,’’ financial risk and investment consultant Mihr Thakar told the star.
The analyst attributed the sliding of the share to high debt obligation and dented reputation that has seen investors offload due to recent power billing and corruption scandals that attracted public outcry.
Kenya Power’s financing costs rose 42.7 per cent or Sh976 million to hit Sh3.3 billion in six month ended December 2017, pulling down profits by 30.3 per cent even as the total revenue grew by 14.8 per cent to Sh67.1 billion
Electricity sales grew by 2.3 per cent from 3,805 Gigawatt Hours (GWh) to 3,893 GWh in the period, which in turn saw sales revenue rise by 2.5 per cent to Sh46.93 billion.
The firm’s board was forced to appoint several new senior managers in acting capacity following corruption and abuse of office allegations against the then managing director Ken Tarus ,former boss Ben Chumo and several officers.
This saw brokers at the NSE issue a buying rating for the company’s share, saying it could come under further pressure and slide below the current levels.
Harrison Gitau, a senior research analyst at Apex said that the recent tariff review may lower profit margins with possible change from foreign currency to local currency in pricing power, hence Kenya Power may lose forex hedge.
He explained that previous high capex leads to high future depreciation projected to slow down the recovery going forward hence advised investors to buy for future.
“Investment into the counter is ideal for the long-term value investor given the alluring dividend yield coupled with potential capital appreciation,’’ Gitau said.The power man announced a 30.3 per cent drop in net profit to Sh2.93 billion in December with further drop anticipated end of year.
