High share demand marks Carbacid and BOC return to NSE

After a four-year absence from the stock market, Carbacid Investments and BOC Ltd marked a return to the Nairobi Stock Exchange on Wednesday amid high demand for the firms’ shares.

Trading in both BOC and Carbacid shares had been suspended since December 2005, due to a proposed merger that hung in the balance until it finally flopped last month with BOC throwing in the towel.

It was Carbacid’s shares that, however, stole the limelight yesterday jumping by 72 per cent to stand at Sh236.

Stock dealers say there was huge demand for both shares with little or no supply during the trading session in what is seen as sellers taking a wait and see approach to gauge what value the market places on the stocks after years on the sidelines.

“Investors seem to be observing both companies and the direction the share prices will take in coming days,” said Ms Gladwell Kairo, a dealer at Suntra Investment Bank.

The highest bid for BOC came in for 100,000 shares at an unchanged offer price of Sh160, with no sellers coming through to match any of the bids.

Carbacid, on the other hand, saw a bid of 200,000 shares at a price of Sh207 with no matching sales apart from a wildcard offer for the sale of 500 shares at Sh250.

At the date of suspension back in 2005, BOC was valued at Sh160 per share while Carbacid was placed at Sh137.

But a change in fortunes for both companies in recent years, which have seen Carbacid’s earnings grow faster than BOC’s, is likely to be the reason behind the higher premium currently placed on Carbacid’s shares.

The attraction

“The carbonated drinks market has been doing very well and the market is growing,” said Mr Rogers Kinoti, a senior fund manager at ICEA Asset Management in a previous interview with Business Daily.

At the core of Carbacid’s success has been the growing demand for beer and fizzy soft drinks in the Kenyan and regional markets.

In the East Africa region, Carbacid is the only manufacturer of carbon dioxide which is a key component in the production of beer and carbonated soft drinks.

It is this stranglehold on the carbon dioxide business, with an estimated market share of 95 per cent, that ignited BOC’s interest for a takeover of Carbacid back in 2005.

The major part of BOC’s business falls under production and sale of gas and welding products with results from other sources comprising of less than eight per cent of the total results of the group.

For BOC, a takeover of Carbacid would have given it an easy entry point into the carbon dioxide business — which is doesn’t manufacture — providing the firm with an opportunity to rev up its revenues and create increasing shareholder value.

But after the failed bid, BOC plans to take on Carbacid’s hold on the carbon dioxide market in an onslaught it hopes will tip the earnings scale in its favour.

Harsh year

Carbacid recorded Sh256 million in after tax profits this year, accounting for a 54 per cent increase from 2008.

The firm’s revenues showed little signs of relenting in a harsh economic year, recording Sh552 million compared to Sh387 million in 2008.

BOC’s turnover, on the other hand, grew from Sh987 million in 2005 to Sh1.2 billion in 2008, while its profits grew marginally from Sh291 million to Sh295 million in the same period.

Some investors in both BOC and Carbacid will be keen to unlock the value of their investments.

But acting as a double edged sword that also saved both firms from the two year bear run that has since dictated proceedings, the suspension staved off the massive share price falls that has befallen other listed stocks since 2007.

At a time when the stock market is running flat and investors are still edgy about trading in equities, an overwhelming attraction for existing shareholders could be to the retention of the shares for a tidy dividend payout.

Last year for instance, BOC paid out a dividend of Sh6.80 for its full year ending December 2008 while Carbacid announced a proposed dividend of Sh10 and a special dividend of Sh5 per share.