Eaagads stock gets lift from dividend and bonus issue

Shares of listed agricultural company Eaagads have risen by more than 50 per cent, boosted by a dividend and bonus announcement, making it the best performing stock in the past three months.

The share closed at an average price of Sh51.00 on Friday, 56.9 per cent above its closing price of Sh32.50 at the end of June according to data from the Nairobi Securities Exchange (NSE).

Eaagads management announced a bonus share issue in the ratio of one new share for every one share held in July.

Investors have been scrambling to acquire the stock ahead of closure of the shareholders’ register on October 5.
The agricultural firm also announced a dividend payment of Sh1.25 for every share held, payable on November 16. Moses Waireri, a research analyst at Genghis Capital, said Eaagads appears set to benefit from the prevailing high coffee prices, though the gains may be cut by volatility in international markets. Mr Waireri predicted that the rally may end once the shareholder register closes for the bonus share issue.
“Historically prices come down (after the payments) so I would expect the price to come down,” said Mr Waireri. Eaagads has 16.078 million issued shares, making it one of the counters with the fewest shares in the market, although it pays out most of its profits in dividends.

It is also closely held and the counter hardly trades compared to other counters such as the banking sector record very high daily trading volumes.

The bonus share issue will see it double the number of shares issued.

Eaagads announced a profit after tax of Sh21.8 million for the year ended March 31 this year. Shareholders approved the bonus and dividend at their annual general meeting and are waiting for regulatory approval for listing of the new shares.

“I think most of the investors were going for the bonus shares and dividends then sell off. I expect the price to come down after the books close,” said a research analyst at Dyer & Blair Investment Bank.

Eaagads price to earnings (P/E) ratio of 36.6 is the third highest at the NSE, reflecting shareholders’ bullish outlook on the counter.

Kenya Orchards, another agricultural firm, has the highest P/E ratio of 75, while City Trust has the second highest of 56.4.