KQ rights start trading as share falls to Sh13.95

Kenya Airways rights traded for the first time on Tuesday at a premium of five cents even as the share price dropped below the discounted cash call cost of Sh14.

The share price dropped to Sh13.95, with 135,800 shares changing hands.

Investors who did not intend to take up their rights were allowed to sell them from Monday, but there were no transactions recorded on the first day of the share sale.

On Tuesday, 228,200 rights were traded, but there was still an excess of 164,000 on the supply side.

“We expect demand to be healthy at this price level,” said the Standard Investment Bank in an investors’ note.

Eric Munywoki, an analyst with Dyer and Blair Investment Bank, said the trades were “mainly from the retail investors, but we expect institutional investors to exercise their rights.”

Investors who buy the rights in the market will have to pay a premium over the market price, making their actual purchase price of Sh14.05, higher than the current market price.

“It’s a good sign that somebody is willing to buy at a premium, but most players have taken a wait-and-see stance, especially the fund managers who usually step in at the last minute,” said an analyst with Sterling Capital.

“We don’t expect much activity as long as the price is at a premium,” added the analyst.

Kenya Airways stock was the worst performer in the first quarter of the year as it shed 32 per cent on the back of a cautionary profit warning statement and announcement of intentions to float a rights issue.

The national carrier is targeting Sh20.6 billion from the cash call running to April 27.