Centum extends share buyback after acquiring 9.7m units
James Mworia (right), CEO of Centum Investments and Risper Alaro, the Group Finance Director, during the company's Investor briefing held at their Two Rivers offices on July 30, 2024.
Photo credit: Wilfred Nyangaresi | Nation Media Group
Centum Investment Company has extended the closing date for its share buyback programme to at least September 20, after managing to snap up just 14.7 percent of the targeted 66.54 million shares over 18-month period.
The company launched the buyback on February 6, 2023, with a target of closing it on August 2, 2024 or earlier if the company was to achieve the full target of shares.
The Centum board also retained the right to terminate the buyback if it was no longer deemed to be in the best interest of the company or due to changes in economic and market conditions and the incidence of a material change in the firm’s financial position.
The company sought to buy the 66.54 million at a maximum price of Sh9.03—and a minimum of Sh0.50— capping the spend on the exercise at Sh600.9 million. The volume of stock being bought back by the company represents 10 percent of its total issued shares.
Last week, Centum disclosed that as of July 26, 2024, it had bought 9.7 million shares, comprising 26 percent of the total traded volumes of 36.98 million shares up to that date from the opening of the offer.
A notice by the firm indicates that it may also ask shareholders to extend the buyback beyond September.
“The extension of the share buyback programme has been approved by the Capital Markets Authority from the date of this notice and extends up to the date of the company’s next Annual General Meeting (proposed to be held September 20), whereupon shareholders may approve a continuation of the programme,” said Centum in its notice dated August 5.
“The programme shall be run on the same terms, which included maximum price for the purchases at Sh9.03. Further, the maximum number of shares approved for purchase remains at 66.54 million shares, out of which the company has so far bought back 9.76 million shares.”
Since the buyback programme opened, Centum's stock has traded in a range of between Sh7.88 and Sh9.50, averaging at Sh8.73 per unit over the period.
A total of 40.6 million shares of the company have changed hands on the Nairobi Securities Exchange (NSE) in the period—at an average of 108,815 units per trading session.
The volume of traded units over the period has therefore been insufficient to satisfy the buyback target.
Trading at levels close to the buyback price has also had the effect of maximising the amount Centum is using to buy back the shares, while at the same time diluting the premium for those who opt to participate in the sale.
Centum went the buyback route after deeming its shares to be undervalued at the NSE for years in relation to its net assets.
At the close of its financial year to March 2024, the company’s net asset value per share stood at Sh62.42 per share, implying an 85.9 percent undervaluation by investors on the NSE going by the current price of Sh8.80 a share.
The company has blamed the sub-par valuation in the market on several factors including investors’ perception of high risk from its previous debt-fueled expansion, an issue it has been addressing by steadily repaying more loans.
