Capital Markets

BAT, Bamburi top club of millionaire counters at bourse

trader

An investor monitors trade at the NSE. PHOTO | FILE | NATION MEDIA GROUP

A steady appreciation of stock prices at the Nairobi Securities Exchange (NSE) has boosted the valuation of a select group of companies turning them into special counters that would make each shareholder a multi-millionaire were the total paper wealth distributed equally among them.

Cigarette-maker BAT and Bamburi, a cement firm – with a market capitalisation of Sh79 billion and Sh61.7 billion respectively – top the list of the all-millionaire owners’ club.

If BAT’s market value was shared equally among its 5,021 shareholders, each owner would have Sh15.7 million of shares, while Bamburi’s 3,064 shareholders would have Sh20.1 million worth of shares each. Estimates of average value of ownership are deemed to help shareholders assess potential benefits of investing in a particular stock.

BAT share price has risen 37 per cent this year to a high of Sh790 in the past month, leaving each shareholder with an average gain of nearly Sh2 million. Bamburi’s share price has on the other hand dipped 21 per cent since January, eating away an average of Sh4 million from each shareholder.

READ: BAT up Sh100 in two days as institutional demand surges

The reality is, however, that share ownership in any firm is never distributed evenly and most of the stocks are held by institutional investors in large blocks.

Market watchers say the reluctance by these shareholders to trade the stocks has been a factor behind the huge value gains. High value stocks have been the subject of debate in the capital markets circles with some analysts arguing that such stocks should be split to make them affordable to retail investors and increase liquidity on the counters.

“Such high valuations come when the companies have few shareholders. However, of importance also is the performance of the counters, given that profit is the driver of growth for any share price,” said Robert Bunyi of Mavuno Capital.

Other NSE stocks with high mean valuation per shareholder include CFC Stanbic, which is 75 per cent foreign-owned through Standard Bank of South Africa, EABL with Sh8.7 million and Athi River Mining (ARM) with Sh7.9 million.

Equity Bank stands at position six with a mean value per shareholder of Sh6.8 million. The bank has a total shareholder base of 24,892. Nation Media Group and Diamond Trust Bank are next in the pecking order with average per capital shareholder wealth of Sh5.5 million (10,594 shareholders) and Sh5.1 million (11,151 shareholders) respectively.

The top individual local shareholder in Bamburi, according to regulatory filings on May 31, was Mr Baloobhai Patel with five million shares worth Sh850 million at current market price.

READ: Baloobhai exits list of top 10 Mumias shareholders

BAT’s top local shareholders at end of May were Shantilal Patel and Meghji Shah with 119 million shares valued at Sh94 million at current market rate.

READ: Kenya’s ageless dealmakers

An analysis of share price performance in the long-term shows that tightly held counters tend to maintain their value over time, meaning their owners are, to a degree, protected from wild swings arising from external shocks.

A common thread among all the top-performing counters in the average investor wealth index is inadequate liquidity arising from tight holding of the stocks by a small number of shareholders. Besides the company’s steady profitability, analysts have attributed BAT’s share price appreciation this year to scarcity in the market that has forced investors to pay a premium for the stock.

It is, however, never a smooth ride all the way for owners of shares in illiquid counters as investors have sometimes lost value based on minor trades on the counter, making it harder to track the real value of one’s holdings.

“While price is a factor in the liquidity, it is also about being able to trade the shares freely at the market rate without running the risk of losing value of the investment,” said ABC Capital corporate finance manager Johnson Nderi.

Analysts have also proposed share splits in counters with the combination of high price value and a limited number of shareholders. BAT, which carries the highest nominal price at the NSE, has in the past ruled out share splits. Investors looking to take up a stake in BAT, therefore, face a high cost barrier that requires at least Sh79,000 for the 100 share minimum purchase, Sh17,000 for Bamburi and Sh28,600 for EABL.

“Splits would make the stocks more affordable, but will not add value to the share itself,” said Mr Bunyi.

On the opposite end of the scale are companies whose share prices have recently plummeted, led by Mumias Sugar where the average value per shareholder has dropped to below Sh50,000.

In the case of the troubled sugar miller, the average market cap for each of the company’s 154,000 shareholders now stands at Sh26,000, far below the initial investment that the shareholders made in the company.

Eveready Kenya, which is currently valued at Sh3.15 per share with a market cap of Sh640.5 million, has a per capita investor value of just Sh5,450. Investors who entered the company during the 2006 IPO paid Sh9.50 per share, with each getting an allocation of 200 shares following an oversubscription.

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