A local chama partly backed by the Kenyan diaspora has started informally trading shares allowing members to unlock the value of their holdings.
Fountain Enterprise Programme (FEP) Group shares are now trading at an over-the-counter (OTC) platform paving the way for its 60,000 members to buy and sell shares of the group with a portfolio worth more than Sh5.5 billion.
Standard Investment Bank (SIB) hosts the platform for trading FEP stock while the share register is managed by Image Registrars.
Group chairman Erastus Mwongera said the share price had hit a high of Sh21 a share, “underscoring keen investor interest in FEP.”
The chama had 394 million issued and fully paid-up ordinary shares as at December 2014 and made a net loss of Sh1.4 billion in the year under review. Deloitte, the auditors of FEP, gave the chama a qualified opinion – meaning that there are gaps in the financial statements.
Founded by architect John Kithaka together with his seven friends in 2009, FEP has grown to be one of Nairobi’s largest chamas with interests in diverse sectors such as real estate, mobile money, retail, insurance, hospitality, and media among others.
FEP now has members both locally and in overseas locations with significant Kenyan migrants such as the US and UK.
TransCentury, an investment club founded in 1997 was the first investment club listed on the Nairobi bourse in 2011 by way of introduction after trading on the OTC platform for two years.
The OTC market is not regulated by the Capital Markets Authority, but helps enhance the liquidity of unquoted stocks, provides an exit strategy for investors, and is key in valuing investments.
FEP now joins a dozen companies currently trading on OTC platforms including Family Bank, Deacons, Jamii Bora Bank, UAP, Kenya Women Microfinance Bank, Smep Microfinance Bank, and accountants investment arm Mhasibu Investment.
The trading of FEP shares opens a new frontier for Kenyan chamas, given that a third of Kenyan adults belong to an investment club.
Kenya’s vibrant and dynamic chama movement is estimated to control assets worth about Sh300 billion, equivalent to 6.3 per cent of recently rebased gross domestic product, according to official data. FEP has so far carried out four rounds of funding from members and a rights issue held in 2014, raising billions of shillings in capital.
FEP is currently holding another rights issue to raise an undisclosed amount of cash to be invested in Credit Bank, complete construction of Suntec Hotel in Sagana and build dormitories at its schools.
A week ago it received shareholder approval to buy an additional 30 million shares priced at Sh180 apiece in Credit Bank equivalent to 70 per cent of the lender.
FEP last year invested Sh107 million in return for a five per cent stake in Credit Bank and full uptake of the ongoing private placement will see the chama control 75 per cent of the loss-making lender.
“Our entry into tier three category of the banking sector is timely. It will expose us to a niche market that is largely underserved by big banks. We therefore see a huge opportunity for growth in this area,” Mr Mwongera said at a recent special shareholders’ meet.
The upcoming four-star Suntec Hotel in Sagana requires Sh900 million to complete construction and fit-out works. FEP has already put in Sh686 million designing and building the 146-key hotel.
Most of FEP’s subsidiaries are prefixed ‘Fountain’ and include MobiKash, Citadelle Security, Fountain Credit Services, Fountain TV and Newspaper, Fountain Microfinance Bank (in formation), infrastructure firm Fountain Technologies and Suntec Supermarkets.
Others are Nobel Insurance Agency, Kisima Real Estate, Fountain schools in Tigoni and Mwea, Fountain Credit Service, and tour operator Fountain Safaris.