Land owned by tyre distributor Sameer Africa has appreciated to Sh8.07 billion in the year ended December 2021, dwarfing the market value of the Nairobi Securities Exchange-listed firm.
The land value is eight times the company’s market capitalisation of Sh1 billion as of yesterday when its share price stood at Sh3.6.
The impact of the appreciating land holdings has not been reflected in the balance sheet or income statement since Sameer uses the original cost of acquiring the asset of Sh575.4 million.
“The group accounts for its investment property at cost less accumulated depreciation and any impairment losses,” Sameer says in its latest annual report.
The company disclosed that it is sitting on gains of Sh7.5 billion, underlining the appreciation of the land.
Sameer does not state the size of its freehold land but sources had estimated that the company has 85 acres in Nairobi’s Embakasi area.
The company is among NSE-listed firms that are deeply undervalued in relation to their hard assets such as land holdings.
Agricultural firms have also been revealed to be worth more than their market capitalisation indicates as their land has risen in value over the decades.
Minority shareholders of Limuru Tea, currently the subject of a takeover offer, have protested the acquisition of a 52 percent stake in the company by Puccini Bidco B.V in a transaction they say undervalues the agricultural firm.
Puccini bought the stake from Unilver International Holdings B.V. as part of a global transaction.
The pricing of the Kenyan deal has not been disclosed but could become public after Puccini was forced to make a buyout offer to the remaining shareholders of Limuru Tea.
Like other asset-rich firms, Sameer has not taken steps to close the gap between its market value and the value of the land holdings.
The tyre distributor’s share price and market capitalisation have dropped sharply over the years, reflecting the impact of losses amid increased competition from cheaper imports.
The company has gone for years without paying dividends.
Sameer’s net profit rose five times to Sh217.3 million in the year ended December compared to Sh43.4 million a year earlier on the back of cost cuts.
Its sales declined to Sh651.6 million from Sh757.4 million.
The company had previously announced it would focus exclusively on the real estate business but reversed the decision to revive its tyre distribution business.