Centum's real estate portfolio lifts credit rating by SA agency

South Africa’s Global Credit Ratings (GCR) has affirmed Nairobi Securities Exchange (NSE)-listed Centum Investments Company Plc’s ability to timely meet financial obligations, backing the firm’s diversified portfolio across the sectors to support growth.

GCR has retained the national scale ratings assigned to Centum of A(KE) for long term borrowing and A1(KE) for short term debt.

The credit ratings, valid until July, 2019 with a positive outlook, boost the firm’s ability to mobilise funds in Kenya at favourable interest rates.

“Much of the value creation has largely been driven by (assets) growth and real estate portfolios, with two more large property ventures expected to contribute strongly to realised and fair value profits over the next few years,” GCR says in the ratings note.

“Nevertheless, the projects’ prospects are closely related to the performance in the property market, which is under some pressure.”

Centum recorded a 35.18 per cent decline in fair value gains on its real estate investments in the financial year ended last March to Sh4.18 billion from Sh6.45 billion the year before.

The decelerated capital appreciation was a reflection of Kenya’s real estate market which suffered slowed growth in sales prices last year.

Its real estate ventures include flagship mixed-use Two Rivers Development Ltd (TRDL) in Nairobi which contributed the highest share to its net asset value (NAV) at 14.76 per cent for the year ended March 2018, Pearl Marina in Uganda and Vipingo in Kilifi.

Centum is currently selling serviced and unserviced plots at its 10,254-acre Vipingo Ridge to unlock value for shareholders.

"We are confident with our stable credit rating and sound liquidity which gives us the capacity to execute on our strategy," said Centum CEO James Mworia in a statement.

"We continue to focus on restructuring our balance sheet by paying down long-term debt as it matures and leveraging on third-party capital at a project level, while improving our credit quality,” he added.

The publicly-traded investment firm plans to resume drilling of more geothermal wells in Naivasha, through its renewable energy arm Akiira Geothermal, from next month.

The geothermal wells drilling in Naivasha, which targets to generate 70 megawatts of steam, forms the first phase of a proposed 140MW-capacity geothermal plant.

“The investments in power are set to substantially change the composition of portfolio in the medium term, while projects in the education and healthcare will further add to the diversity of earnings,” GCR says.

“Positive ratings action is dependent on continued strong profitability, both from annuity type income and asset sales. Gaining critical mass in other targeted sectors would be positively viewed, as it would lessen dependence on new property developments.”