Centum Investment Company has raised the price at which it is buying back a portion of its issued shares to Sh9.51 from the previous Sh9.03 after announcing an extension of the offer to March 31, 2026.
The company first ran the buyback programme between February 6, 2023 and August 2, 2024, targeting 66.54 million shares which represented 10 percent of its 665.44 million issued shares.
By the close of the period, it had acquired 9.85 million shares, representing a performance rate of 14.8 percent for the buyback plan, hence the company’s decision to extend the purchase period and also offer potential sellers the sweetener of a 5.3 percent premium on the earlier buying price.
The company will seek a nod from shareholders to roll out the extension during its Annual General Meeting on September 30, with the purchase set to begin on October 1, 2024. It has already received the approval of the Capital Markets Authority (CMA) for the extended buyback.
“The board recommends that the maximum price of the purchase shall be Sh9.51, being 10 percent above the weighted average price of Sh8.64 in the 30 days prior to the buyback reference date,” said Centum in the circular.
“The company has been exempted from the limit under the guidelines to purchase no more than 25 percent of the average daily trading volume for the four calendar weeks preceding the date of purchase.”
The minimum purchase price of the shares remains Sh0.50, which is also the stock’s nominal value.
During the initial phase of the buyback, the Centum share traded in a range of Sh7.88 and Sh9.50, averaging about Sh8.73 per unit over the period.
Centum’s stock was trading at Sh8.30 at the Nairobi Securities Exchange (NSE) yesterday afternoon, offering investors buying at that price an opportunity for capital gains if they later sold the company the shares.
Centum went the share repurchase route after deeming its shares to be undervalued at the NSE for years in relation to its net assets.
Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting the market valuation besides increasing the stakes of continuing shareholders.
At the close of its financial year in March 2024, the company’s net asset value per share stood at Sh62.42 per share, implying an 86.7 percent undervaluation by investors on the NSE going by the current price of Sh8.30 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.
The price of the company’s share has halved from Sh16.80 in August 2021, partly attributed to oversupply by sellers, with Centum saying that the buyback will offer shareholders an alternative option to realise value from their investments.
