TransCentury shares valued at Sh47 each ahead of NSE listing

Private equity firm TransCentury’s share has been valued at Sh47 ahead of listing on the Nairobi Stock Exchange by the end of the year.

Goodson Capital Partners, a South African-based strategy and research firm said the company’s value stood at Sh12.5 billion, attributing the price to its promising future.

“The main reason for our valuation was the high growth potential in infrastructure, engineering and consumer products,” Goodson Capital Partners managing director, Japheth Munywoki told the Business Daily.

TransCentury has mainly 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 firm’s Sh6.8 billion turnover in 2010.

This division deals with the manufacture and distribution of transformers, copper and fibre optic cables, through its subsidiaries, East Africa Cables, Kewberg Cables and Braids, Cableries du Congo and Tanelec spread throughout East, Central and Southern Africa. According to analysts, this division has the biggest potential for growth due to the potentially large market for its products.

Access to electricity in Africa is low and governments are allocating huge budgets to connect many to power grids, a move that has boosted demand for transformers and copper cables.

The number of people with access to electricity as a percentage of the entire population and in East Africa, where TransCentury mainly operates—known as penetration rate—stands at 13 per cent.

The more advanced African markets of Ghana and South Africa have penetration of 61 and 70 per cent respectively.

“This correlation implies that demand will increase as the economies grow and we expect continued resource discoveries (oil in Uganda) to grow the region’s economy at large,” said the Goodson report.

The private equity company plans to float 267 million shares on the stock exchange.

However, analysts said while it was possible to do a valuation using company results, it would be prudent to wait for an information memorandum which summarises facts about a company, how it intends to grow and any challenges that it is likely to face in future. Mr Eric Musau, a research analyst at African Alliance Investment Bank, said an information memorandum would give a better guide to the value of a company since an investment company and an infrastructure or an energy one are valued differently.

“If you value the company as an energy company based on growth its shares might trade a bit higher (than an investment company),” said Mr Musau. Centum, for example, is trading at Sh23.50 while TransCentury was trading at the Sh50 on June 3, the last day of trading of the firm’s shares.

Wycliffe Masinde, a research analyst at Kestrel Capital, said that valuing a company such as TransCentury is difficult since it is a firm that has shares in other companies and therefore valuation has to be broken down to the companies that make up the portfolio.
“It is quite a challenge,” said Mr Masinde.

Gives the greenlight

Mr Masinde concurred that an information memorandum will be a better guide and this is expected to come after the market regulator, the Capital Markets Authority, gives the green light for the firm to list through introduction expected to take place by the end of this year.

Onesmus Kihara, a dealer at Dyer and Blair Investment Bank said while the shares closed at Sh50, it is the market that will be the last judge on the value of the firm’s shares.

CFC Insurance shares, for example, rose by 127 per cent to Sh14.80 against the initial Sh6.52 valuation they had been given. The Sh50 per share value of the company’s shares when it closed its books is also higher than the Sh12.5 billion valuation by Sh1.8 billion.

Mr Kihara said that there was a build up for the share towards the book closure of June 3.

“There was a standing demand for 1.2 million shares, but there were no many sellers,” said Mr Kihara.

[email protected]