EABL becomes first company to cross Sh300bn valuation

Beer maker EABL has become the first NSE-listed firm to surpass the Sh300 billion market valuation mark, as its share has maintained a steady climb driven by solid demand from both local and foreign investors.

The share closed at an average price of Sh385 on Thursday, having gained 4.3 per cent or Sh16 in the day’s trading from Wednesday’s closing of Sh369.

With 790.7 million listed shares, East African Breweries’ market capitalisation surged to Sh304.45 billion, overtaking Safaricom to become the stock market’s most valuable company.

Three days after announcing strong annual profit growth, Safaricom’s market valuation dropped from Sh294 billion recorded on Wednesday to Sh290 billion, as its share fell 10 cents to close at Sh7.25.

“Investors could be factoring in growth prospects for EABL in the Tanzanian and Ethiopian markets, making this share attractive to buy. It has been recording steady growth in the market this year, and one cannot rule out the scarcity issue about the stock as well,” said Suntra Investment Bank analyst Johnson Nderi.

The day’s trades were split between local and foreign investors, reflecting balanced demand for the stock, with Mr Nderi saying that EABL being a blue chip stock, investors may be seeking to hold onto the counter for the long-term due to its price stability.

Standard Investment bank analyst Eric Musau said the share has moved up with the market on the back of high demand, although the prospects of high dividend yield is unlikely when the company announces its results later in the year, given the heavy investment expenditure it has been making.

“The company has recently increased its borrowing to fund significant investments and putting up additional capacity, including buying the remaining 20 per cent stake in Kenya Breweries and purchasing Serengeti,” said Mr Musau.

The share is now performing above analyst projections, which showed it holding at below Sh300 this year.

In an investors’ note released in April, Kestrel Capital projected that EABL’s Tanzania operations would rise at a 15.1 per cent compounded annual growth rate (CAGR) in the next three years.

Over the same period, the CAGR for the Ugandan and Kenyan operations is projected to be 9.4 per cent and 10.9 per cent respectively.

Relating these projections to the price of EABL shares, Kestrel Capital said they consider the stock to have a one-year fair value of Sh289, given the projection of good earnings for the next three years.

While the stock is viewed as “expensive” in the short term, Kestrel Capital said it remains “attractive” over the longer period of three years.

EABL and Safaricom have been exchanging top spot in the valuation stakes at the NSE this year, with the mobile services company also benefiting from a steady rise in price, buoyed by improved earnings and dividend yield expectations.

On Tuesday, Safaricom announced a 31 cents dividend per share on the back of a Sh17.5 billion net profit for the year ended March 31.