Transcript Presentation to the Board and Management of CFC Stanbic
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MIND SPEAK
PRESENTATION BY JAMES MWORIA
Agenda
1.
Background 2.
Centum 3.
Investment Planning 2
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Background
Career Progression
2001 – ICDCI intern 2001 – ICDCI Management Accountant 2004 – ICDCI Head of Investments 2007 – TCL Head of Investments 2008- Centum CEO 4
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Centum
Our core business
Centum is the investment channel that provides investors access to a diversified portfolio of unquoted and quoted investments Our focus is on making investments in private equity (62%), public equity (35%) and real estate Our vision is to become “Africa’s foremost Investment Channel.” Our mission is to create enterprises in Africa real, tangible wealth by providing the channel through which investors access and build extraordinary
Our Portfolio
Financials
Aon Minet Insurance Brokers UAP Holdings K-Rep Bank Kenya Commercial Bank
Beverages
KWAL Mount Kenya Bottlers Nairobi Bottlers Rift Valley Bottlers Kisii Bottlers EABL
% of total portfolio 44.3%
5% 14% 0.3% 25%
24%
2% 4% 6% 4% 3% 6%
% Stake
21.50% 24.23% 3.78% 3.58% 26.43% 28.62% 27.62% 44.03% 23.87% 0.45%
Our Portfolio
Publishing-Longhorn Automotive-GMEA Services
NAS Airport Services Safaricom Limited Infrastructure Rift Valley Railways (Pty)
Others
& more recently 23% of Carbacid
% of total portfolio 4% 16% 4%
2% 2% 0% 0%
4% % Stake 35% 17.82%
9.13% 0.10% 10%
<1.00%
Centum Corporate Performance Vs NSE Index
Year
2009 2008 2007 2006 2005
Annual Percentage Change Per Share Book Value of Centum NSE Index with Dividends included
-24% -3% 35% 32% 57% -40% -5% 21% 8% 49%
Relative Performance
16% 1% 14% 24% 8%
Current Situation
Market valuations across most asset classes have come down significantly Market sentiment is very low and this has reduced investor appetite Risk aversion has increased and this has resulted in increased equity risk premium and higher emerging market risk premiums hence reducing pricing Many emerging market private equity funds and hedge funds are scaling back
Opportunities
More attractive buying environment with more reasonable valuations Reduced competition from other investors Increasing equity investment opportunities as alternative funding options become tighter Reduced appetite for debt has created demand for equity investment among companies
Competitive Position
Permanent capital vehicle with a strong financial position, low leverage and high stable cash flows Our portfolio companies are market leaders in their sectors with very strong competitive advantage, this positions them to fare well even in a down turn Flexibility to invest in illiquid assets and outside Kenya A solid track record in making and managing private equity investments
Investment Approach
Aim to deliver consistent market beating returns Invest in companies with a track record that solve basic needs or that displace sub-optimal solutions in markets that we understand sub-Sahara Africa represents the largest region of untapped demand in the world 13
Strategy Highlights
We will focus on making investments in the following asset classes across Africa: 1.
Private equity: take controlling and minority investment opportunities in unlisted companies 2.
Quoted Private Equity: take influential positions in listed companies and employ private equity techniques to create value 3.
Real Estate: build a diversified portfolio of real estate investments
What we invest in
Asset Class Approach
Private Equity Quoted Private Equity Real Estate • • Make investments of between Kshs 160 – 800 mm per investment to acquire either a controlling or minority equity position Acquire influential stakes in quoted companies and employ private equity techniques to create value • Make real estate investments with a cash flow stream or where one is imminent within 18 months
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Investment Planning
Investment Planning Process
1.
Planning 2.
Execution 3.
Feedback 17
Case Study
Mary is a 30 year old marketing executive in a large multinational FMCG company Her current monthly take home pay is Kshs 130,000 She expects 5% salary increase every year She plans to retire with her husband John in Lamu at age 55 She wants to be able to earn Kshs 500,000 a month in passive income for the rest of her life once she retires. She also hopes to still leave behind a sizable inheritance upon her death She is able to save Kshs 30,000 per month increasing by 5% every year 18
Problem?
Is Kshs 500,000 a month a realistic return objective?
Is Mary’s salary consistent with her dreams?
Should she move to a better paying job?
What sort of return must she aim for?
Should she agitate for an extension of the retirement age?
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Mary’s Investment Plan
Mary decides to Invest Kshs 360,000 annually increasing at 5% per annum Mary is a very conservative person and against the advice of her husband John she invests in what he considers very low return assets yielding 12% a year John is very skeptical that Mary’s savings will amount to much and he does not shy from telling her so 20
Mary’s Wealth Accumulation
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Results of Investment Program
Upon retirement Mary has a portfolio worth Kshs 78m She will have invested a total of Kshs 17 m Her portfolio will generate a passive return of Kshs 780,000 upon retirement Mary will be able to spend more and still save more in retirement than she did while employed 22
Myths about Successful Personal Investing
You need to be making a lot of money You need to have special knowledge You need to invest in very high return assets You need to work for a long time 23
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