Home Afrika HY2025: +16% revenue, still negative equity

🔍 1. Quick Summary — What’s Going On?

Home Afrika has reported a profit for HY2025 (KSh 192.4M), which is good.

But the company still has severe financial problems hidden beneath that profit:

✔️ Good Signs

Revenue up 16% to KSh 359M.

Home Afrika Ltd - HY25 Results

Profit before tax improved to KSh 192M (from 168M).

Home Afrika Ltd - HY25 Results

Operating costs have reduced.

More income from Migaa Golf Estate activities.

❌ Major Risks

The company has negative equity of -KSh 2.14B.

This means liabilities exceed assets — technically insolvent.

Home Afrika Ltd - HY25 Results

Current liabilities = KSh 5.74B vs current assets = KSh 3.21B → severe liquidity pressure.

Home Afrika Ltd - HY25 Results

Borrowings remain heavy:

• Bank loans: KSh 1.05B
• Private bond: KSh 680M

Barely any cash left: KSh 4.6M only.

Home Afrika Ltd - HY25 Results

Cash flow from operations = positive, but almost all is consumed by financing repayments.

Home Afrika Ltd - HY25 Results

🧠 2. What This Means in Simple Language

The good:

Home Afrika is selling more, especially at Migaa, and recording solid profits.

The reality:

The debt burden is extremely high, the company is negative equity, and it is surviving mainly through:

• deferred income from plot buyers,
• restructuring agreements,
• and selling inventory (plots).

This is not a financially stable company yet.

📊 3. Key Red Flags a New Investor Must Notice

1️⃣ Negative equity = high risk

Equity is deeply negative at -2.1B, meaning:

• If all assets were sold today, they wouldn’t be enough to pay all debts.

This categorizes the business as being in a distressed financial position.

(This is the biggest red flag.)

2️⃣ High current liabilities

Current liabilities: KSh 5.7B

Current assets: KSh 3.2B

This means:

• They owe KSh 2.5B more than they can pay this year.
• They must keep selling land to survive.

3️⃣ Very low cash

Cash = KSh 4.6M

This is extremely low for a company of this size.

4️⃣ Financing costs remain heavy

Interest costs dropped (to KSh 34M) but still significant.

Home Afrika Ltd - HY25 Results

5️⃣ No dividend

No payout to shareholders.

This is normal for distressed companies.

📈 4. Positive Things to Pay Attention To

Even though Home Afrika is highly risky, there are factors showing a turnaround attempt:

✔️ Profitability is improving

Operating profit rose to KSh 227M.

Home Afrika Ltd - HY25 Results

✔️ Cash flow from operations positive

They generated KSh 367M from operations.

Home Afrika Ltd - HY25 Results

✔️ Migaa Golf Estate is becoming a valuable asset

Events, tournaments, and plot sales are increasing revenue.

✔️ Debt restructuring ongoing

If successful, this could:

• reduce interest expenses,
• extend loan periods,
• possibly save the business.

🧭 5. Investor Advice (For a New Investor)

🟥 A. If you are risk-averse → AVOID for now

Home Afrika is highly speculative.

Reasons:

• Negative equity
• Massive liabilities
• Almost no cash
• Dependent on continuous plot sales to survive
• No dividend history
• Share dilution remains a real risk

This is not a classic stable investment.

🟧 B. If you are a high-risk investor → Treat it like a PENNY-STOCK BET

Home Afrika trades at very low price on NSE.

It can:

• give huge returns IF turnaround succeeds
• drop sharply or stay stagnant if debt restructuring fails

This is a speculative turnaround play, not an investment for safety.

🟩 C. What to Monitor Before Buying

If you want to consider buying, watch these:

1. Debt restructuring progress

If lenders agree to:

• extend debt terms,
• reduce interest,
• convert debt to equity…

THAT is the key moment the stock may jump.

2. Cash balance in future results

Cash must grow significantly for the company to be healthy.

3. Inventory sales (plots)

Their entire survival depends on converting plots into cash.

4. Negative equity movement

If equity becomes less negative over time → positive signal.

⭐ 6. My Final Recommendation (Beginner-Friendly)

👉 Home Afrika is NOT a fundamentally safe investment.

It is a distressed, high-risk company showing signs of an operational turnaround but still financially fragile.

If you are new:

• Don’t put serious money here.
• If you buy, it should be a small, speculative amount only.

This is not a stock for long-term safe growth.

Think of it like betting on a recovery story—not a guaranteed investment.

Results

🚩 1. Profit is coming mainly from accounting — not real cash

Home Afrika shows:

• Profit before tax: KSh 192M
• Cash increased by only KSh 4.6M

This is a classic turnaround-company issue:

• ✔️ Profit is mostly from:
  • recognition of deferred income
  • plot sales recorded as revenue
  • other non-cash items (e.g., accrued revenue)
• ❌ But it is NOT backed by strong free cash flow.

A company can show profit even while struggling with liquidity. This is a warning sign.

🚩 2. Inventories are extremely high and rising

Inventory (plots, land, units) = KSh 2.54B

This is HUGE for a company with:

• low cash (4.6M)
• negative equity
• heavy debt

Meaning: They are holding massive stock they haven't sold.

If these plots don’t move fast, cash flow stops and the company becomes unstable.

This also raises questions:

• Is the land valued at realistic market prices?
• Is it impaired?
• Why is inventory still so high after many years?

🚩 3. Receivables doubled — possible collection risk

Trade receivables:

• 2024: KSh 341M
• 2025: KSh 671M (almost doubled)

This means:

• They are selling plots but buyers are not paying immediately
• Cash is not coming in as fast as revenue is recorded
• There may be high default risk on installment buyers

A company with liquidity problems cannot afford slow-paying customers.

🚩 4. Deferred income dropped sharply → future revenue pressure

Deferred income:

• 2024: KSh 239M
• 2025: KSh 143M

This is 40% decline.

Deferred income represents future revenue already prepaid.

If it drops sharply, it means:

• fewer new customers paid deposits,
• future revenue outlook may weaken.

This is a leading indicator of slowing sales.

🚩 5. High dependence on plot deposits for survival

Deposits for sale of plots: KSh 2.29B

This is dangerously high compared to:

• inventory,
• actual completed developments.

This raises risks:

• If buyers cancel or demand refunds, company may not have cash.
• The company might be using deposits to pay old debts — financially risky.

🚩 6. Bond of KSh 680M still unchanged

The private placement bond:

• 2024: KSh 680M
• 2025: KSh 680M (no repayment)

This is a sign that:

• They have not been able to reduce or refinance it.
• Bond investors may be refusing restructuring.

This is a major solvency risk.

🚩 7. Non-controlling interest got smaller (another warning)

Non-controlling interest:

• 2024: -KSh 448M
• 2025: -KSh 352M

Why this is bad:

• It means subsidiaries with minority shareholders continue to be loss-making or eating up value.
• A subsidiary with negative NCI means the parent company is absorbing losses on behalf of minorities.

Subsidiary performance remains weak.

🚩 8. No tax charge — unusual for a profitable Kenyan company

Profit before tax: KSh 192M

Tax charge: 0

This is a red flag:

A consistently profitable company should pay tax.

Zero tax suggests:

• huge carried forward tax losses, OR
• unrecognized deferred tax liabilities, OR
• the profit is from non-taxable adjustments.

It signals long-term accumulated losses, confirming the distressed condition.

🚩 9. Cash from operations up — but net cash barely moved

Operating cash flow: KSh 367M

Cash at end: KSh 4.6M

Why?

Because financing outflows swallowed almost everything (loan servicing).

→ Net cash from financing: –331M

This means:

• The company is still trapped in a debt cycle.
• Most money it earns goes to lenders, not growth.

🚩 10. Assets barely grew — but liabilities remain huge

Total assets fell:

• 2024: 3.739B
• 2025: 3.604B

Meanwhile, liabilities are:

• 2024: 6.07B
• 2025: 5.74B

They are shrinking, but VERY slowly.

This means the company is:

• not growing,
• selling assets and inventory to pay debts,
• not investing in new developments.

That’s not a signal of long-term financial strength.

🚩 11. No dividend + Still negative equity

The board:

does NOT recommend a dividend.

This is expected.

Why?

Because the firm is still technically insolvent.

Even if profits appear, dividends will likely remain zero for several years.

🚩 12. The real estate market reliance

The business is 100% dependent on:

• plot sales,
• golf events,
• property development.

It has no diversified income streams.

If real estate slows down → Home Afrika collapses easily.

🧨 13. "Improved profit" may be misleading

The company highlights growth:

“Revenues up 16%, profits up, EPS up.”

But the underlying structure is weak:

• profit does not match cash,
• assets decreasing,
• receivables increasing,
• deferred income falling.

This is what we call a fragile turnaround.

⭐ Final Decision for a New Investor

✔️ Is Home Afrika showing improvement?

Yes — operational profit is up, Migaa is active, costs are controlled.

❌ Is Home Afrika in a safe financial position?

Not at all.

It is still:

• negative equity,
• heavily indebted,
• cash-poor,
• reliant on plot deposits,
• struggling with liquidity,
• with questionable future cash flow stability.

⭐ My honest recommendation:

If you are a new investor, treat Home Afrika as a high-risk penny stock speculation, not a stable investment.