NIC stock touches four-year high even as cash call looms

NIC Bank stock touched a 52-week high of Sh80.50 Monday despite a rights issue planned next month.

The bank’s share has gradually been rising since the beginning of the year from Sh60 to close at Sh79 on Monday, after touching the new high. This represents a Sh31.6 per cent increase.

Share prices normally come down ahead of a rights issue since issuers usually offer discounts as incentives for existing shareholders to participate.

The last NIC rights issue of July 2012 saw the bank offer new shares at Sh21, which was a 22.4 per cent discount on the weighted average price of six months.

Analysts say the share price appreciation ahead of the rights issue is a sign that investors are accumulating the stock to enable them buy more shares at a discounted price.

Samuel Oyier, a research analyst at StratLink Global, said investors expect the price will continue to rise after the rights issue that will strengthen the bank’s capital base and allow it to comfortably increase its loan book.

“With the bank’s capital adequacy issue addressed and an increase in funds for expansion from the USD denominated loan from the IFC, my view is that the more sophisticated investors may be looking to increase their holdings in the bank to enable them maximise returns from a discounted share price which should eventually correct once trading begins,” said Mr Oyier.

Mr Oyier added the banking industry as a whole is expected to perform stronger in the second half of the year which should draw investors to banking stocks.

Diamond Trust Bank recently also had a rights issue that managed to attract Sh16 billion against the Sh3.6 billion that it was targeting. DTB rights issue was discounted at Sh165 offer price below the Sh244 market price.

“The share price remained flat at Sh244 amid an expected dilutive effect once the new shares commence trading on the 26th of August 2014. The successful rights issue indicates high investor appetite in the market,” said a market report by Genghis Capital then.

The share however closed at Sh260 in Monday’s trading indicating the impending dilution failed to impact on its price. NIC Bank shareholders approved a Sh2 billion rights issue at the beginning this month during the firm’s extra-ordinary general meeting.

The bank is also raising Sh3 billion through a corporate bond besides seeking the Sh4.8 billion loan from the IFC.