Centum Investments traded shares worth Sh1.5 billion on Monday, equivalent to 3.75 per cent of the company’s market value, in what analysts said may be due to the need by some investors to cash in before capital gains tax (CGT) becomes effective next month.
The counter traded 25,196,700 shares at an average price of Sh61 each which analysts said was a block trade involving local investors.
In the last 12 months the share has nearly doubled in price, which is also six times higher than five years ago, showing that an investor who has been holding the stock for years would make a huge return on selling.
The transaction is likely to cause a shift in the top 10 shareholding of the investment firm given that only three investors hold such a portfolio.
It was not possible to identify the person or institution behind the sale or the buyer due to customer confidentiality that forbids stockbrokers from making such disclosures.
“It is hard to tell the reason behind the sale but generally we expect such transactions during the month of December with the capital gains tax taking effect in January. A few investors who have had shares in their portfolio for a long time are seeking to lock their gains,” said Silha Rasugu research analyst at Genghis Capital.
The government intends to reintroduce a five per cent tax on value gained from equity holding, real estate and other investment assets at the beginning of January. With the Centum share price having risen nearly six times in the last five years, long-term investors are exposed to huge tax liability.
The capital gains have been critical for Centum’s shareholders who have had to forego dividends in line with the company’s policy of re-investing its entire earnings.
The firm recently launched a new five-year strategy under which it intends to retain the zero-dividend policy, meaning the shareholders will have forgone profit- sharing for a decade by the end of the period.
The CGT will be charged on the difference between the sale value and the acquisition price net of any transactional costs. However, it does take account of inflation over the period, causing even more jitters.
Billionaire businessman Chris Kirubi, who is the majority shareholder in the company, declared plans to increase his stake to 29.9 per cent from 24.9 per cent in September last year. As at August this year his shareholding stood at 25.1 per cent.
To achieve his target he needs to buy an additional 32.65 million shares. Mr Kirubi did not answer his phone when we tried to contact him Tuesday.
Other majority shareholders in the company include government agency ICDC whose stake stands at 22.97 per cent and financial services firm, UAP Holdings, with a 4.77 per cent ownership. Mr Kirubi has interests in UAP holdings.
Centum has announced several corporate actions including the recent acquisition of a 66 per cent shareholding in K-Rep Bank. Other actions that may have played a role in the rise of the company’s share price include its bid to acquire listed agricultural firm Rea Vipingo and the tender to lead construction of the Lamu coal plant.
In the acquisition of Rea Vipingo, the firm faces a competing bid and the matter is before the Capital Markets Authority tribunal, with Centum pushing for the competitors bid to be declared null and void, arguing that it is not specific.
Centum’s allocation of the tender to construct the Lamu coal plant has been challenged in court.
Analysts consider the Centum share a buy given the experience of its management team.
“It is a buy as a long term stock given its trading multiples are still favourable making it a good value,” said Mr Rasugu.