Centum Investment Company Plc acquired 4.64 million shares from shareholders in the first five months of its share buyback programme, representing seven percent of its targeted number in the 18-month plan that opened in February.
Centum is targeting to buy back up to 66.54 million of its shares 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 that Centum intends to buy represents 10 percent of the total issued shares.
The latest shareholder register filings show that the company held 4.64 million units in its own name as at July 7, which at the maximum price stipulated would have cost it Sh41.9 million to acquire.
Since the buyback opened on February 6, the Centum share has traded in a range of between Sh8 and Sh9.50, averaging at Sh8.81 per unit over the period.
A total of 10.54 million shares of the company have changed hands at the Nairobi Securities Exchange (NSE) in the period — at an average of 91,634 units per trading session — meaning the company has accounted for just under half of shares traded in the past five months.
Trading at levels close to the buyback price has 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.
Over the past one week, the share has been trading above the buyback price at the NSE, effectively forcing shareholders to hold on to their units unless they are willing to take a haircut when selling to Centum.
The board of Centum has retained the right to terminate the buyback on certain conditions, including when the programme is no longer deemed to be in the best interest of the company, changes in economic and market conditions and the incident of a material change in the firm’s financial position.
Centum stock has been deemed to be undervalued at the NSE for years in relation to the company’s net assets, and the share buyback is expected to help close the valuation gap.
Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting the market valuation besides increasing the stakes for shareholders.
In the half year to September 2022, the company’s net asset value per share stood at Sh59.80, implying an 84.4 percent undervaluation by investors trading its stock on the NSE going by the current price of Sh9.06 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.
