TransCentury stock value drops by 67pc since listing
TransCentury CEO Gachao Kiuna. The NSE-listed Investment firm plans to raise funds to finance its projects in the next six months, the company’s board has announced. PHOTO | FILE
What you need to know:
TransCentury was valued at Sh13.35 billion upon entering the stock market in July 2011 when it listed by introduction some 267 million shares at Sh50 each.
The share price has since dropped to Sh16.10, meaning the company is now valued at Sh4.51 billion.
Analysts contend that the investors who had valued the stock at Sh50 in the over-the-counter (OTC) market—hence the similar listing price— may have been too optimistic in their valuation.
TransCentury Limited shareholders have seen the value of their holdings in the company plummet by two-thirds over the past four years, a sign that the share may have been too optimistically priced during its listing by introduction.
TransCentury which started as an investment club in 1997, was valued at Sh13.35 billion upon entering the stock market in July 2011 when it listed by introduction some 267 million shares at Sh50 each.
Immediately upon listing it climbed to what remains its all-time high of Sh57, before it started to decline.
Over the intervening period the share price has dropped to Sh16.10, meaning the company is now valued at Sh4.51 billion. TransCentury has since listing issued more shares in the market to take its total to 280.28 million.
Analysts contend that the investors who had valued the stock at Sh50 in the over-the-counter (OTC) market—hence the similar listing price— may have been too optimistic in their valuation.
“The buyers in the OTC market may have failed to interrogate the price properly. If the stock was properly priced, the market’s price-finding mechanism even with some depreciation would have seen it settle at a level near the listing price,” said ABC Capital corporate finance manager Johnson Nderi.
“Sometimes investors in the OTC market are willing to pay a premium to access a scarce stock,” Mr Nderi said.
The share had been traded at the OTC market between 2009 and 2011. Having come in at Sh50, its price oscillated for a time between Sh40 and 45 partly due to a lack of liquidity given that it was only traded among a limited number of investors.
The recent slide has come at a time when the company was selling off its 34 per cent stake in the Kenya-Uganda Railway Holdings Limited (KURH) which saw it earn Sh3.8 billion. The price was 21 per cent below the recorded fair value of Sh4.8 billion.
The Sh1 billion loss on fair value was partly to blame for the company’s Sh2.2 billion net loss for the financial year that ended in December 2014.
Going forward, analysts see the company recovering through expected improved performance from its engineering, power and metals businesses.
Standard Investment Bank analysts said in a note on the company on Monday that development of the Menengai geothermal plant will improve the performance of TransCentury’s power division.
“With regard to oil, gas and mining sectors, the company sees recent discoveries as opportunities for growth. Civicon’s (a subsidiary) business has a strong pipeline of signed contracts which is positive for future revenue growth for TransCentury engineering division,” said SIB.
According to Mr Nderi, the business remains solid, but there is some concern over the liability side especially on the convertible Eurobond issued in 2011.
TransCentury management announced last week that it would offer a rights issue —which means raising cash from existing shareholders—whose proceeds will be used to repay investors in the bond.
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