TransCentury chairman Zephania Mbugua (right) shake hands with the CEO, Dr Gachao Kiuna, after announcing the listing of the company at the NSE. The share stayed below the Sh50 floating price for the second day. Fredrick Onyango
The TransCentury share price traded below the introductory offer of Sh50 for the second day as dealers blamed low investor demand.
The share traded at Sh49.50 yesterday after defying analyst expectations to trade at Sh57 on listing.
“TransCentury opened at a premium, most analysts had priced it at between Sh45 and Sh50. So it was already trading at a premium on the first day of trading,” said Robert Munuku, analyst at Drummond Investment Bank.
“What we are witnessing is price discovery,” he explained, adding that buyers were waiting for the price to reach a target range before they start placing bids.
Johnson Nderi, analyst at Suntra Investment Bank said that the low demand is a result of the price to earnings (PE) ratio being too high which makes the counter expensive.
TransCentury has a PE ratio of 38 which is more than Centum Investments 6.8.
Volumes on the counter also reduced for the fourth straight day to 36,000 shares, compared to 1.14 million on Thursday, the first day of trading.
Renaldo DeSouza, a research analyst at Genghis Capital, said profit taking could be behind the share falling below the offer price.
“Some of the holders bought the share over the counter at a lower price and have made some money on it at the current market price,” said Mr DeSouza.
Foreign investors also stayed away from the counter.
A report by Sterling Investment Bank said that the share is expected to remain volatile as it seeks direction, with a potential of sliding further.
“However, the stock might lose further ground in line with the general market downturn and lack of adequate support in the short term,” said the report.
TransCentury has 267 million shares but only 50 per cent or 133 million are available for sale for the next two years as per the listing conditions provided by industry regulator, Capital Markets Authority.
The company has 150 million shares that have not been issued, but are reserved for buyers of the Sh6.7 billion bond it is currently selling in Mauritius and whose proceeds will go to the Rift Valley Railways where it has a 34 per cent stake.
This is, however, based on the assumption that the bond is fully taken up upon listing and that it is held to maturity and not converted.
TransCentury has also invested in consumer goods, specialised engineering, transport, property and investment funds and power infrastructure.
The power infrastructure division of the company contributed 81 per cent or Sh4.5 billion of the Sh6.8 billion turnover in 2010.
