Analysts see more gain for Uchumi share

Market analysts are counting on new investments to boost Uchumi’s performance this year, after it emerged as the best performing stock in 2012.

The stock was the biggest gainer last year, having more than doubled its share price driven by soaring investor demand for the stock.

The payment of a dividend in 2012 completed a turnaround for the retailer from a shocking Sh1.2 billion loss in 2005, a year before the company’s share was stopped from trading on the Nairobi Securities Exchange (NSE) after it was put under statutory management.

The cumulative loss between years 2003 and 2007 was Sh2.43 billion, culminating in insolvency that forced the government to come to Uchumi’s rescue.

It was sweet music to the ears of investors when the retailer announced a dividend of 30 cents per share after a 10-year drought. For the first time, the management appeared confident that the profit-making trend which began in 2008 would be sustainable.

The share price hit Sh19.45, from the January opening price of about Sh7.50. The retail chain’s revenue hit nearly Sh14 billion in the financial year to June from only Sh4.5 billion five years ago. The three-fold growth in the topline has been a result of opening new branches.

The bottomline has, however, not performed consistently. Uchumi’s highest profit level in the past decade was Sh865 million in 2010 but this has since fallen. In the year to June, the firm saw its net profit go down by nearly 30 per cent as operating expenses rose by 48.2 per cent, much higher than the gross profit increase by 33.8 per cent.