Longhorn market value up 30pc in six months, hits Sh1 billion mark

Publishing firm Longhorn Kenya’s valuation has touched the Sh1 billion mark for the first time since September 2012, following a rise in share price driven by increased government spending on education.

With the stock trading at between Sh17 and Sh17.50 in the past week, the valuation of the company now stands at Sh1.01 billion.

The counter is now only one out of three listed under the Alternative Investments Market Segment (AIMS) at the NSE valued above Sh1 billion. The others are Transcentury and Williamson Tea. There are eight actively trading counters in this segment.

Longhorn has gained 30 per cent since the beginning of the year, when the stock stood at Sh13.50. Over a period of one year, the gain stands at 94 per cent, placing it among the top 10 gainers at the market.

Analysts have pointed at the increased allocation by the government to public schools as a catalyst for increased revenue for Longhorn and other publishers, signalling better future performance.

“With public schools accounting for 60 per cent of book sales for publishers, the move is set to reverse the effects of the imposed value added taxes which increased prices and reduced sales. Going forward, the anticipated introduction of a new curriculum in the country in 2016 is set to generate demand for titles as schools switch over,” said a Standard Investment Bank analysts in an equities market note.

READ: Text book publishers set for double gains

Last week, Longhorn announced an interim dividend of 80 cents per share for the nine months ending March 2014, the second dividend issue since listing. The firm’s net profit in the nine months ended March dropped 0.3 per cent to Sh63.2 million compared to Sh63.4 million the year before, with higher expenses cancelling out turnover growth.

Sales jumped 5.7 per cent to Sh802.1 million but this was offset by distribution expenses that more than doubled to Sh174.6 million. Longhorn, however, cut its provisions for receivables by 71.9 per cent to Sh33.4 million, signaling improved collections from customers.

“Our thrust into new geographical markets as well as consolidation of existing territories will be stepped up and augmented with offerings in e-learning,” said Longhorn managing director Musyoki Muli in a statement announcing the dividend on June 5.

In the budget statement for the 2014/15 financial year, Treasury Secretary Henry Rotich allocated Sh28.2 billion towards free secondary education, up from Sh20.9 billion in the previous budget.

Free primary education will get Sh13.5 billion up from Sh10.3 billion in the last financial year, with Sh17.4 billion allocated to the laptop project, which will also include a component of content creation, which publishers will be eyeing.

The introduction of 16 per cent VAT on books pointed to depressed earnings for publishers as sales dipped. This has forced publishers to explore export markets and start investments in e-learning content production.