The share prices of a select group of companies listed on the Nairobi bourse more than doubled in the past 12 months on the back of big-ticket deals, adding billions of shillings worth of paper wealth to the big owners.
Investment firm Centum, Pan Africa Insurance, Britam, Unga Group and Kenya Orchards have seen their share prices appreciate by between 102 per cent and 566 per cent since September 2013, according to the latest market data, more than doubling the fortunes of billionaire investors.
Most analysts considered the share prices of these companies to have been depressed and undervalued a year ago – their price to earnings ratios having dropped to below 10 per cent – a relatively low level by world standards.
Market forces and a general rise in economic activity over the past 12 months have, however, lifted the prices, enabling them to beat by large margins the Nairobi Securities Exchange (NSE) All share Index which rose 32 per cent to 160 points.
Standard Investment Bank director Job Kihumba said that while every transaction is always unique, demand for a stock comes if investors think it is going to add value, whether in the short, medium or long term, depending on their understanding of the investment outlook.
“Investors who are after dividends may not look favourably at acquisitions since they often mean that the dividend payment will not be forthcoming in the near term,” Mr Kihumba said, adding that those who buy in with an eye on the long term know that the acquisition will pay off in the end and the value of their investment will appreciate.
“This is the group that is willing to pay a premium for the shares today with an eye on the future gains.”
The list of billionaire investors whose fortunes have risen with the market tide includes Britam’s Benson Wairegi and Jimnah Mbaru, Baloobhai Patel, who holds a majority stake in Pan Africa, and Chris Kirubi of Centum. Britam’s share price rose 233 per cent in the past one year to Sh27.50, pushing its market valuation from Sh15.6 billion to Sh52.01 billion.
Regulatory filings made at the end of July show that Mr Mbaru owned 219.3 million shares in Britam, meaning the businessman’s paper wealth appreciated by Sh4.23 billion to Sh6.03 billion. The value of Mr Wairegi’s 100.3 million shares rose by Sh1.93 billion to Sh2.76 billion over the same period, making him the second-largest individual beneficiary of Britam’s share rally.
The sterling share price performance came on the back of the recent takeover by Britam of Real Insurance in a Sh1.4 billion deal and the buyout of Equity Bank’s 24.75 per cent stake in listed mortgage firm Housing Finance.
Centum, whose share price has appreciated by 127 per cent in the past year, is also in the midst of an acquisition spree that has seen it place a Sh4.5 billion takeover bid for listed agriculture firm Rea Vipingo in addition to the Sh1 billion acquisition of fund manager Genesis Kenya.
The investment firm whose single-largest shareholder is Mr Kirubi, with a 25 per cent stake, has also put in a bid for a 66 per cent stake in small-tier lender K-Rep Bank. The acquisition will take Centum’s total stake in the bank to 67.54 per cent in a deal estimated to be worth Sh2.5 billion. Mr Kirubi’s 25 per cent stake is currently valued at about Sh9 billion having more than doubled from Sh4 billion a year ago.
Unga Limited’s 110 per cent share price gain to Sh34.75 since September 2013 has been one of the surprise stories of the stock exchange, lifting the miller’s value to Sh2.63 billion.
The company’s majority shareholder Victus Limited, with a 50.9 per cent stake, is associated with the family of former Central Bank of Kenya governor Philip Ndegwa. The company’s stake in now valued at Sh1.34 billion, up from Sh638.1 million in September 2013.
The miller plans to create 25 million shares and use them to acquire Ennsvaley Bakery in a share swap transaction that is valued at Sh869 million based on Unga’s current trading price.
Also in the list of big gainers at the NSE is Sanlam Group of South Africa, the majority shareholder at Pan Africa Insurance, whose 55.82 per cent stake appreciated by Sh3.35 billion to Sh6.64 billion on the back of a 102 per cent share price gain to Sh124.
Baloobhai Patel, the Nairobi-based businessman with a 20 per cent stake in the insurance firm, is now worth Sh2.4 billion on the counter, up from Sh1.18 billion a year ago. Last year Sanlam progressively raised its stake in Pan Africa with the ultimate aim of crossing the 60 per cent mark.
Kenya’s corporate deals pipeline has been busy this year after a relatively quiet 2013 – a revival that Mr Kihumba attributes to improved political climate that remains tempered by teething problems associated with the devolved system of government.
He expects an increase in such acquisition deals, from both local and foreign entities, especially from the West where relations have improved after a rocky start associated with President Uhuru Kenyatta’s trial at the ICC.
“Some American investors I have spoken to say that last year they felt shunted out of Kenya as the country looked wholly East, but now they feel things have improved and are increasingly looking to invest here,” said Mr Kihumba.
Analysts see Kenya Orchards’ 566 per cent gain from Sh3 to Sh20 per share in a year to have been driven by low-volume trading because the company has not been involved in any significant corporate action over the period.
On Thursday last week, the share gained 9.6 per cent based on a single trade of 100 shares, revealing the effect that small trades have on traditionally illiquid counters.
Kenya Orchards’s majority shareholders were listed in the June 30 regulatory filings as Tharakshi Patel and Vipul Patel, with 4.3 million and 1.9 million shares respectively, with the total issued shares in the company at 12.8 million.