Vinyl floor manufacturer Olympia Capital topped several small firms that beat blue chip firms at the Nairobi Securities Exchange (NSE) after it closed the year as the second-best performing stock at the bourse in 2022.
A Business Daily analysis shows that smaller firms at the NSE led the market in price gains last year, helped by positive corporate actions such as dividend announcements, rights issuances and cuts in debt portfolio which drove up demand and prices.
Olympia Capital’s share price gained 48 per cent over the year to close at Sh2.96, making it the second best-performing stock last year after NCBA Group, which gained 56.15 per cent.
The investment firm with a Sh118.4 million market cap at NSE posted a 10.4 per cent growth in profit after tax in the six months ended August to Sh16.4 million from Sh14.9 million compared to a similar period in 2021, however, did not recommend payment of interim dividend.
Over the half-year period, the firm also cut its borrowing by Sh21.06 million to Sh5.05 million from Sh26.12 million coinciding with a decline in finance costs.
The company in the manufacture of vinyl floor tiles, adhesives and sports equipment, through Olympia Capital Corporation (Pty), has interests in Kalahari Floor Tiles (Pty) Limited and Gaborone Enterprises (Pty) Limited, both in Botswana.
The company is owned by Dunlop Properties Limited, which controls 26.2 per cent, followed by Paul Wanderi Ndung’u at 11.99 per cent and Karen Enterprises Limited at 9.09 per cent, among others.
Other small companies at NSE by market capitalisation that recorded gains include Car & General, Crown Paints and Limuru Tea added 39.76 per cent, 37.21 per cent and 31.25 per cent respectively, defying the market loss of Sh606.84 billion in the year.
The NSE market closed 2022 at Sh1.986 trillion from Sh2.59 trillion in the year ended December 31, 2021.
These small stocks tend to see high volatility in prices, largely because of their low turnover which means a few small trades can shift prices significantly.
Small-cap companies tend to have much smaller customer bases, so their prospects are more uncertain in times of economic uncertainty.
Many are also illiquid, making it also difficult for an investor to take up or exit a position in the market.
Car & General, with a Sh3.8 billion market cap, saw its share price begin to pick up in January 2022 after the company announced it was quadrupling its dividend payout to Sh3.20 a share on top of a bonus share issuance.
The issuance of a one-for-one bonus drove demand for the stock ahead of book closure on the issuance on March 24.
Crown Paints Kenya’s price rally followed a year of right issue to raise Sh711.8 million by issuing and listing 71,181,000 new ordinary shares on the NSE, a process that was completed in June 2021.
Shareholders applied for 64.2 million shares in the rights issue under entitlement, leaving a balance of 6.9 million shares which Belize-based investment firm Barclay Holdings and other investors applied for as additional units.
Barclay Holdings acquired an additional 4.63 per cent stake in Crown Paints Kenya Plc, amounting to 6.5 million shares, expanding its majority ownership to 66.68 per cent, according to disclosures made in April 2022.
Some shareholders snubbed the cash call that was priced at Sh10 per share, allowing Barclay Holdings to take up the additional stocks and raise its stake from 62.05 per cent in May 2021.
Money raised from the rights was said to be used to reduce debt and turn around the fortunes of regional loss-making subsidiaries that have been depending on the Kenyan parent company to finance their operations.
Over the year, NCBA Group, a tier one bank with a market cap of more than Sh64.8 billion was the top gainer in the year adding 56.15 per cent equivalent to Sh14.15 to its share price.
The gains followed a drop in equity turnover by 32 per cent or Sh44.2 billion to Sh92.98 billion.
Centum was the top loser shedding 40.71 per cent of its share price over the year.
Safaricom was the most active stock with 1.56 billion shares in exchanging hands the year, followed by Equity, KCB, Kenya Power and Absa Bank.