Speculation over results lifts EABL to most traded stock

Speculation on beer maker EABL’s annual results has lifted the stock to the most traded counter at the Nairobi Securities Exchange in July.

Data from the exchange shows investors traded East African Breweries (EABL) shares worth Sh1.4 billion, ahead of the second most traded stock, KCB, whose stock recorded a turnover of Sh844.2 million ($10.05 million).

Equity Bank was the third most heavily traded stock in the month, with a turnover of Sh763 million ($9.08 million).

EABL’s financial year ended on June 30, and the brewer is expected to announce its annual results on August 24.

The head of trading and business development at Old Mutual Securities, Alistair Gould, said speculation on the likely impact of last year’s purchase of Serengeti Breweries on EABL’s performance was driving the stock.

“Investors are positioning themselves ahead of the results,” said Mr Gould. Foreign investors have been key buyers of the stock, recording a net purchase of shares worth Sh386 million in July.

“Foreign investors were aggressive on EABL, pushing it to a high of Sh227 during the week,” said Sterling Capital’s report.

The high investor demand has seen EABL maintain its position as the most valued NSE company, with a market capitalisation above Sh170 billion ahead of Safaricom’s Sh150 billion.

KCB and Equity Bank released results for the first half of the year last month. EABL spent Sh4.9 billion to buy a 51 per cent stake in Serengeti Breweries, a Tanzanian outfit, in 2010.

Eric Musau, a research analyst at Standard Investment Bank, said that the purchase should now begin to pay off.

“By our estimates Serengeti Breweries should break-even this year,” said Mr Musau, but added that the gain from selling its 20 per cent stake in Tanzania Breweries Limited is also whetting investor appetite.

EABL is expecting Sh6.3 billion from the sale of a 20 per cent stake in TBL which should be reflected in the books this year.

“There will be a one-off gain from the sale of Tanzania Breweries,” said Mr Musau.

The brewer has borrowed to buy back a stake in KBL from SABMiller but overall increase in earnings should lessen the impact on interest from the Sh19.5 billion loan EABL got from Diageo its parent company.

Mr Gould said EABL’s position as the most capitalised stock on the NSE and its high liquidity makes it favourable to international investors who, in addition to valuation, look at how easy it is to buy and sell stock.