By Kodi Barth
You know the Business Daily. It’s a newspaper published on Kimathi Street. Underline the word, “newspaper.”
Readers grab the Business Daily for, well, business stories. And because this is a newspaper, not a business journal, the average reader should understand a story.
A week ago the paper ran two successive stories by same author, Charles Mwaniki, about the shining investment company that deceased billionaire Chris Kirubi built, Centum.
For those average readers whose heads hurt reading them, below is a translation. Thank us at the end.
First story: “Centum’s Two Rivers subsidiary to sell stake by April” (January 20).
Paragraph 1: “Listed investment firm Centum will sell a stake in its Two Rivers Development Limited (TRDL), a subsidiary with major landholdings and a mall, by April to raise new capital and cut debt.”
In English, “listed” means the company is traded at the Nairobi Stock Exchange. “Stake” means shares. “Cutting debt” means reducing loans on the company’s books.
Paragraph 3: “The company is still determining the structure the deal will take, which depending on the valuation agreed with the investors could be in form of a straight equity sale or a convertible instrument.”
“Structure” means, will the parties want to buy/sell shares? Will they want to take/give out a loan? Either way, under what terms? “Equity sale” means, again, selling shares. “Convertible instrument” means a loan that at a future date, and if terms are satisfied, will turn into shares.
Paragraph 4: “Centum’s shareholding may or may not be diluted, depending on how the transaction will be structured.”
“Dilution” means a decrease in ownership. The value of someone’s shares will decline. Say more people join the family dining table and find a cake already shared out. For everyone to eat, your piece of the cake must be cut again. You’ll still have one cake, but its size will reduce. You’ve been diluted.
Paragraph 12: “The debt was part of $96 million (Sh10.89 billion) secured during the construction of shopping and office complex. The disposal of part of its ownership in TRDL is among several transactions Centum has lined up to raise cash and monetize a section of its assets.”
To “monetize” means to earn cash, usually continuously, from something.
Second story: “Overweight and undervalued: why Centum is selling real estate stake” (January 21).
Paragraph 1: “Investment firm Centum recently announced that its real estate arm was looking to raise Sh17 billion from an equity deal with Luxembourg-based private equity firm GEM Global Yield, as part of a wider shift from debt.”
“Debt” means loans, as opposed to raising money by selling shares.
Paragraph 2: The company’s chief executive James Mworia spoke to the Business Daily about the plans to list the real estate subsidiary, new investment areas and what can revive its undervalued stock at the bourse.
“Listing” means entering a company to trade at the stock market. “Undervalued stock” are shares that are trading cheaper than somebody’s estimation. “The bourse” is the (Nairobi) stock exchange.
Question 1: Now that Centum is cutting back on exposure to real estate, what are the new investment options you are looking at?
“Exposure” in this case means overreliance on one source of revenue.
Paragraph 4: “From an asset allocation perspective, our limit for marketable securities is 20 per cent and 80 private equity. As of September 30, 2021, we were at 18 per cent in marketable securities.”
“Marketable securities” are assets that can be turned into cash quickly.
Terminologies tossed about in the story:
Net Present Value (NPV) is the difference between cash coming in now and that expected over a future period. It translates future cash flow into today’s shillings.
Net Asset Value (NAV) in this story indicates what one share in the real estate business is truly worth.
Book value is the value of a company’s assets according to the company’s own balance sheet.
Put option is a contract giving a party the option to sell its assets at a predetermined price on or before a future date.
There you have it. In English.
