BAT up Sh100 in two days as institutional demand surges

British American Tobacco (BAT) stock has gained almost Sh100 in the past two trading days, driven by scarcity and heavy demand from corporate investors.

BAT rose 9.14 per cent (Sh67) Tuesday to close at a fresh all-time high of Sh799, having briefly touched Sh801 in intra- day trading. This followed the 4.5 per cent gain recorded on Monday when it opened the week at Sh702 a share.

That means investors who bought 1,000 shares on Monday gained nearly Sh100,000 on Tuesday.

Equity traders said Tuesday’s gain was pushed by a foreign investor putting up a block of 676,800 shares for sale, setting off a scramble for the stock, mainly from local institutions willing to pay a premium for the stock.

Traders said during the recent price rally, the stock remained scarce while demand was strong as investors eyed generous dividend and capital gain.

“Both local and foreign investors have been chasing after the stock, and even with such gains as we have seen, there has been no profit taking that would otherwise release some of the held up supply.

READ: BAT Kenya commits to 100 per cent dividend payouts

A number of the sales are being done off-book due to the difficulty in finding sellers,” said Old Mutual Securities head of research Eric Munywoki.

The recent gains have moved the stock into the upper gainers list at the bourse this year, unusual for a stock carrying its high nominal price tag.

BAT is up 33 per cent this year with Mr Munywoki saying this kind of return plus a high dividend yield raises the investor attraction for the stock.

BAT is among the shares deemed most illiquid in the market, due to the limited number of issued shares and unwillingness of its owners to sell.
It tends to be largely held by long-term investors.

Its current price means an investor needs a minimum of Sh80,000 to buy into the company, locking out many retail investors who would find the cost prohibitive were the shares available for purchase.

BAT stock this year has received a lift from unchanged local sin tax as well as recovery of its key market of Egypt following a dip in exports last year due to the political strife.

The company also benefits from a steady demand with a market share and size that grow with the population in its markets.

BAT is also able to pass on higher costs arising out of tax to consumers without affecting its market size.