Market News

Sanlam liquidity a put off for retailers

mugo

Sanlam chief executive Mugo Kibati. photo | diana ngila

Retail investors are unlikely to benefit much from a potential price upside on listed insurer Sanlam’s share due to illiquidity of the stock, an investment bank has said.

Dyer & Blair Investment Bank projects the Sanlam stock to have an upside of up to 15 per cent riding on higher income from general and marine insurance.

This capital return is likely to represent the only source of return on the stock, with a dividend drought likely to go on into a fourth year due to higher capital requirements.

“As at the end of the 2016 financial year, the top 10 shareholders controlled 82.3 per cent of the company’s share capital reducing the availability of shares for active trading in the market. We are of the view that this will hold for the foreseeable future, which may reduce ability of an investor to take advantage of capital gains,” said Dyer & Blair in a coverage note on Sanlam.

The share is currently trading at Sh25. It has gained 11 per cent in the past one month but is still 37 per cent down on its price of one year ago.

South Africa’s Sanlam owns 57.1 per cent of the Kenyan unit, while billionaire investor Baloobhai Patel has a 20.7 per cent stake.