Bloomberg News

British American of Kenya to Expand in Region, Boosting Revenue

July 29, 2011

July 29 (Bloomberg) -- British American Investment Co., the Kenyan financial-services company whose initial public offering closes on Aug. 5, expects revenue growth to accelerate next year as it expands into neighboring Tanzania and South Sudan.

The company is “optimistic” operations will begin in at least one of the two nations in the first quarter of 2012, Managing Director Benson Wairegi said in an interview yesterday in the capital, Nairobi. The expansion may help the company exceed the industry’s average growth of 15 percent, he said.

“Our average growth rate for the past five years in total revenue terms has been about 22 to 23 percent,” Wairegi said. “Going forward, we are targeting a growth rate of between 20 and 30 percent.”

Kenyan companies are expanding in East Africa to boost market share and take advantage of accelerating economic growth. Gross domestic product in the East African Community, a common- market of more than 133 million people in Kenya, Uganda, Rwanda, Burundi and Tanzania, is expected to grow 6.4 percent in 2016, compared with 5.8 percent this year, according to International Monetary Fund data.

British American is raising as much as 5.85 billion shillings ($65 million) of new equity capital in an initial public offering to finance its expansion. Earlier this month, it introduced services in Uganda, where the business is expected to break even in three years, Wairegi said.

‘Market Leader’

British American is the market leader in individual life insurance in Kenya, with a 25 percent share in 2009, and an 11 percent share in group-life insurance and pensions, Wairegi said. The company’s fund-management unit, British American Asset Managers, has funds worth 17 billion shillings and has the largest market share of unit trusts at 33 percent, African Alliance Securities Kenya Ltd. said in an e-mailed note to clients on July 25.

Only 2.9 percent of Kenyan households have insurance, according to Sterling Investment Bank Ltd., which has a “buy” rating on the stock. That compares with a global average of 7.5 percent, and rates of 16.5 percent in England, the market leader, and 16 percent in South Africa, the continent’s biggest economy, the Nairobi-based brokerage said in a note on July 26.

British American is offering 650 million shares at 9 shillings each. The stock will begin trading on the Nairobi Stock Exchange on Sept. 2, Wairegi said. Sterling has a price estimate of 11.63 shillings on the stock.

Property Investment

After the initial public offering, the company plans to use some of the funds raised to boost its investment in property to as much as 30 percent of all its assets within about three years from 9 percent now, Wairegi said.

Projects include an office block on 1.5 acres (0.6 hectares) of land in Upper Hill, a financial district next to Nairobi’s city center, with an initial 2 billion shillings being earmarked, he said. In Kilimani, a residential-commercial suburb in Nairobi, British American will undertake property development on 1.6 acres, he said.

“We are also looking for more land in interesting areas like the Thika-Nairobi super-highway and the Mombasa Road, which as you know are two areas that are growing very fast,” Wairegi said.

China Wu Yi Co., based in Fujian, China, Sinohydro Corp. and Shengli Engineering Construction are building a 27 billion- shilling road linking Nairobi with the pineapple-growing town of Thika 40 kilometers (25 miles) north. Part of the road linking Nairobi with the port city of Mombasa is also being rehabilitated.

British American Investment holds an 11.05 percent strategic equity investment in Equity Bank Ltd., Kenya’s biggest bank by customers, and 16.57 percent of Housing Finance Co., the country’s largest provider of home mortgages, according to Sterling.

--Editors: Paul Richardson, Ben Holland.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net.


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