Capital Markets

Top NSE investors suffer Sh27bn paper losses in bear market run

image

From left, Peter Munga, Pradeep Paunrana, Chris Kirubi and Bharat Thakrar. PHOTOS | FILE

Kenyan billionaire investors with a huge exposure at the Nairobi Securities Exchange (NSE) have chalked up paper losses of Sh27.3 billion this year, making them among the hardest hit in the stock market bear run that started in March.

The market slump has substantially eroded gains made by the wealthy investors — including Peter Munga and Pradeep Paunrana — in the three-year bull market run that started in 2012.

Portfolio losses booked by 14 prominent billionaire investors at the NSE now stand at an average of Sh1.9 billion, with the range of their paper wealth declines at the bourse standing at between Sh210 million and Sh5.5 billion.

The big investors, however, tend to have a long-term view of the market and the financial muscle to ride out bear runs, suggesting these losses are unlikely to be realised.

A majority of the publicly traded firms have seen their share prices fall by double-digits this year, including blue-chip stocks where the holdings of the wealthy investors are concentrated.

READ: Stock market investors lose Sh157bn in seven months

The NSE 20-Share Index is down 23 per cent since the beginning of the year while the overall market, as captured by the NSE All-Share Index, has declined 12 per cent over the same period.

More than a dozen NSE companies have also reported losses or lower-than-expected earnings, depressing their share prices and leading edgy investors to reduce their exposure.

READ: Britam profit alert pushes the tally for the year to a record high of 14

The stock market sell-offs have been linked to a mix of factors, including profit taking by foreign investors and the jitters caused by the now-shelved capital gains tax of five per cent.

The recent move by the US Federal Reserve to raise interest rates for the first time in nine years could further pile pressure on the Nairobi bourse as dollar-denominated investments — traditionally considered safer — become more attractive to international investors.

Mr Munga, the chairman of Equity Group, has suffered the biggest paper loss, with his portfolio of stocks at the NSE shrinking by Sh5.5 billion since January to about Sh5 billion currently.

This represents a 52.4 per cent drop that was driven by a fall in the share prices of Equity Bank and insurance firm Britam in which he is a major investor.

Britam’s share price has dropped 55 per cent to Sh13.6 apiece while that of Equity has receded 20 per cent to Sh40 each.

The bank’s share price had previously touched a high of Sh63 while Britam had rallied to a peak of Sh40, indicating that their recent fall could have been partly caused by profit-taking sales.

Britam, whose net profit dropped 77.4 per cent to Sh624.5 million in the half year ended June, has issued a profit warning for the full year ending December citing unrealised losses on its equities portfolio.

Mr Paunrana, the CEO of ARM Cement, has the second-largest loss of Sh4.1 billion. His 18.1 per cent stake in the cement manufacturer now has a market value of Sh3.5 billion, down 53 per cent from Sh7.7 billion in January.

ARM has sunk into losses in the wake of high finance costs and unrealised foreign exchange losses on its foreign currency loans. The cement manufacturer is currently seeking to raise $125 million (Sh12.7 billion) from a strategic investor, who is expected to take a controlling stake in the company once it converts the preference shares it will be allotted.

Equity Bank CEO James Mwangi is third on the list of big losers with a Sh3.5 billion paper loss on his holding of the bank and Britam stocks that are down 29.4 per cent to a market value of Sh8.6 billion.

Mr Mwangi holds a 4.88 per cent stake in Equity Bank and a 5.37 per cent interest in the insurer. Investment banker Jimnah Mbaru is fourth with a paper loss of Sh3.2 billion on his Britam shares.

Mr Mbaru has sold off a chunk of his other NSE stocks, including those of investment firm TransCentury.

Nairobi lawyer Jane Michuki has booked the fifth-largest loss of Sh2.9 billion on her Britam shares. Her 9.2 per cent stake in the insurer is now valued at Sh2.4 billion, compared to Sh5.3 billion at the beginning of the year.

Chris Kirubi, the single-largest shareholder in the investment firm Centum with a 29.9 per cent stake, is sixth with a Sh2.8 billion paper loss.

Centum’s stock has fallen 23 per cent since the year started to the current range of Sh47 apiece, ending a rally that was sparked by Mr Kirubi’s share purchases and announcement of major projects, including the company’s entry into power generation.

READ: Centum’s Mworia the top dealmaker in 2015

Mr Kirubi has raised his interest in the company from 24.99 per cent in September 2013 to the current stake in share purchases that saw the stock hit a high of Sh84.5 last year as speculators jumped in.

A Sh1.7 billion decline in Britam CEO Benson Wairegi’s stakes in the insurer and Equity Group halved his paper wealth to Sh1.7 billion compared to Sh3.4 billion in January.

Other billionaire investors who have seen their paper wealth decline by hundreds of millions of shillings are WPP ScanGroup CEO Bharat Thakrar, who has lost Sh777 million, Co-op Bank CEO Gideon Muriuki (Sh600 million), and Baloobhai Patel (Sh664 million).

Equity Group’s Leah Muguku, Jane Njuguna, Simon Thuo and Franklin Ndii round up the major paper losses of Sh344 million, Sh630 million, Sh281 million, and Sh210 million respectively, taking a hit from the bank’s share price fall.

John Kibunga Kimani was the only billionaire investor to record an overall gain on his NSE portfolio, helped by the share rally in Kakuzi that offset the losses in his holdings of Total Kenya, Nation Media Group and East African Breweries Limited.

Mr Kimani gained Sh463 million, sending the value of his portfolio up 17.4 per cent to Sh3.1 billion. His 26 per cent interest in Kakuzi jumped 93 per cent as the agricultural firm’s share price rose steadily since January to the current range of Sh349 each.