Overview:

Old Mutual Investment Group Uganda joins analysts in challenging the 9.00 shilling Kenya Pipeline Company IPO price, suggesting the shares are overvalued by 49 percent.

KAMPALA, Uganda — Old Mutual Investment Group Uganda has joined a growing list of analysts contesting the valuation of Kenya Pipeline Company’s initial public offering, suggesting the shares are overpriced by nearly 50 percent.

In an initiation note released after the offer opened, the Ugandan fund manager valued KPC at 4.61 Kenya shillings per share. This figure is significantly lower than the Kenyan government’s IPO price of 9.00 shillings.

The discrepancy centers on an equity value gap of more than 86 billion shillings. While the official offer values the pipeline utility at 163.56 billion shillings, Old Mutual’s analysis points to an intrinsic value of 77.4 billion shillings.

Local analysts noted that the report advises investors to wait for a price correction after the company lists on the Nairobi Securities Exchange. The firm argued that the current pricing includes a premium that likely limits any short-term gains for buyers.

To reach its valuation, Old Mutual used a blended framework. It applied a discounted cash flow model and a comparison against regional utilities like KenGen and Kenya Power, as well as energy firms such as Seplat and Aradel.

The debate is particularly relevant for Uganda, which accounts for more than 30 percent of KPC’s revenue. Over 90 percent of Uganda’s fuel imports transit through the 1,342-kilometer Kenyan pipeline system.

This economic link has moved into the political sphere. Kenyan President William Ruto previously indicated that Uganda would be invited to acquire a stake in the company to foster regional integration. According to the IPO prospectus, up to 20 percent of the shares on offer have been reserved for East African Community governments.

Despite the criticism from independent researchers, the deal’s sponsoring brokers continue to defend the 9.00-shilling price. They cite KPC’s 91 percent market share and its role as a regulated monopoly with steady cash flows.

Other independent firms have issued similarly cautious outlooks. NCBA Investment Bank placed the fair value at 6.35 shillings, while Standard Investment Bank estimated it at 5.61 shillings. Some market analyses have suggested the value could be as low as 3.28 shillings per share.

The Kenyan Treasury expects to raise approximately 106.3 billion shillings from the sale of a 65 percent stake in the utility.