Carbacid share hits four-year high

Carbacid’s wealth October 23, 2013 went up by Sh2.9 billion after news of share bonus and split. Photo/FILE
Carbacid’s wealth October 23, 2013 went up by Sh2.9 billion after news of share bonus and split. Photo/FILE  Nation Media Group

The wealth of investors in Carbacid Wednesday jumped by Sh2.9 billion after the share gained more than half its value on Tuesday’s news that the carbon dioxide maker would carry out a bonus share issue and stock split.

The firm’s shares stood at Sh230 at the close of trading Wednesday at the Nairobi Securities Exchange (NSE) compared to Tuesday’s closing price of Sh145—pushing the stock to its highest point since November 2009.

This pushed the value of its share to Sh7.8 billion up from Tuesday’s level of Sh4.9 billion, a boon to the gas maker’s shareholders including billionaire investor Baloobhai Patel and former Cabinet minister Maina Wanjigi.

Stockbrokers linked the jump to the bonus share given that firm maintained dividend at the same level as last year despite its profits growing 22.1 per cent.

“Carbacid was the day’s top gainer climbing 58.6 per cent after announcing a Sh3 per share final dividend, a 1:2 bonus issue and a 5:1 split,” Standard Investment Bank said in a brief to its clients.

The company said its net profit grew to Sh475.5 million in the year to July compared to Sh389.2 million a year earlier and recommended the bonus payment of a share for every two held and the split of stocks into five parts.

This comes despite the firm’s sales remaining static at Sh952.8 million, a pointer that the profit growth was mainly driven by cost cuts.

The firm, which produces and supplies pressurised carbon dioxide and dry ice has in recent years posted double-digit rise in sales including last year when its revenues rose 60 per cent.

Carbacid has benefited from increased demand for CO2 from food and beverage firms such as EABL, Coca-Cola, and flavoured juice makers who use the commodity as a preservative for food and beverages.

It declared a final dividend of Sh3 per share, unchanged from the previous year, taking the total payout for the year to Sh6. The split of its stock is set to make Carbacid’s shares more affordable at the Nairobi bourse, a move that stock brokers reckon will boost demand.

But its flat sales are in contrast to the growth recorded in Kenya’s beverage markets — its main client for carbon dioxide.

Analysts expect the carbon dioxide market to grow as these companies announce mega expansion plans, a trend that has caught the eye of rival BOC Kenya that plans to use its dormant licence for mining and manufacturing of carbon dioxide.

This will be the latest attempt by BOC to gain a stake in the carbon market after it failed to acquire Carbacid, the main CO2 producer in 2005 after the Capital Markets Authority refused to approve the deal.

A review of BOC’s eight year performance indicates that the gas-maker has remained stagnant and trailed its peer Carbacid — which was the smaller firm when the takeover was announced.

While the market value of Carbacid stands at Sh7.8 billion, BOC’s stood at Sh2.2 billion at the close of trading Wednesday.