Investors shift focus to I&M’s debut share price at NSE
I&M Bank building along Kenyatta Avenue, Nairobi. Investor focus is expected to be fixed on the new pricing of I&M Holdings’ shares in Tuesday’s trading. FILE
Investor focus is expected to be fixed on the new pricing of I&M Holdings’ shares in Tuesday’s trading.
This follows the conclusion of a reverse takeover of investment firm City Trust, previously the listed entity, by I&M Bank.
(Read: I&M Bank set to debut at the stock market on June 25) City Trust was trading at Sh448 per unit before its share was suspended from the Nairobi Securities Exchange (NSE) pending conclusion of the merger.
The deal, however, included a re-structuring of the new entity’s capital structure that involved a stock split of five-for-one and issuance of new shares, which makes it hard for investors to assign it a market price before its debut at the bourse.
Transaction advisers for the deal, Dyer and Blair Investment Bank, valued the new entity at Sh40 billion implying a share price of between Sh100.01 and Sh105.1 on its debut at the exchange.
“We initiate coverage on I&M Holdings at a fair value of Sh111.87. Against our fair value, forward (financial year 2013) price earnings and price-to-book ratios stand at 10.2 times and 2.0 times, respectively. On total assets, I&M Bank ranks sixth in our universe of nine listed banks,” a research report by Standard Investment Bank (SIB) said.
The new stock will be listed on the Main Investment Market Segment of the NSE.
I&M Bank had an asset size of Sh144 billion as at the end of last year, compared with KCB (Sh367 billion), Equity (Sh243 billion), Co-operative Bank (Sh200.8 billion), Standard Chartered (Sh195 billion) and Barclays (Sh184 billion).
SIB added that they see I&M Bank as one of the lenders offering better scope to deliver higher net interest margins (NIMs) as focus remains on growing local currency assets, and over a three-year forecast period predict the bank’s loan growth to outperform the industry average.
I&M’s profit after tax, which stood at Sh3.86 billion in 2012, is projected to grow to Sh4.29 billion in 2014 and Sh5.04 billion in 2015.
The bank’s assets are also projected to rise from Sh144 billion in 2012 to Sh168 billion in 2014, and further to Sh205 billion in 2015.
I&M Holdings Limited will have 392,362,039 issued shares, having incorporated a 5:1 split of the 5.72 million City Trust Limited stock whose trading was suspended at Sh448 per share ahead of the transaction in addition to an issue of 363,722,034 new ordinary shares to I&M shareholders for the acquisition.
The split will see City Trust increase its shares from 5,728,001 of par value Sh5 each to 28,640,005 of a par value of Sh1 each, according to the circular on the deal issued to City Trust shareholders.
The authorised share capital of the company will increase from 50 million ordinary shares to 500 million ordinary shares by creation of an additional 450 million ordinary shares. Both City Trust and I&M Bank will operate as separate entities under one group after the merger, with the banking arm becoming the biggest business of the group unlike previously when City Trust owned just 7.28 per cent of the lender. I&M Bank shareholders will hold 92.7 per cent shares of the new entity.
Following the listing, key shareholders of the new entity being Minard Holdings Limited, Tecoma Limited, Ziyungi Limited, and Mnana Limited, have agreed to lock in 50 per cent of their holdings for two years.
The combined shareholding of these key shareholders aggregates about 60.52 per cent of City Trust and 50 per cent lock in upon the successful completion of this transaction, will result in 30.26 per cent of City Trust shares being locked-in, with a resultant free float of 69.74 per cent, according to City Trust disclosures.
