Capital Markets

Bear market tests Centum value margin

mworia

Centum Investments group CEO James Mworia. FILE PHOTO | NMG

Centum Investment’s #ticker:ICDC potential capital gains could be hampered by current foreign exits from the local stock market, which have reduced liquidity.

ApexAfrica Capital says in the latest update while encouraging investors to buy the stock that they should not expect quick gains even though the company has a value greater than its current price.

Bearish sentiments triggered by foreign investors exits on the Nairobi Securities Exchange have cut total investor wealth by more than Sh400 billion since the beginning of the year, leaving market cap at slightly over Sh2.1 trillion.

Even after the more than a quarter growth in net profit for the half year, Centum Investments share price rose a shilling to Sh27.50.

“Still under maximum pessimism, there’s capital gains to be booked, we encourage exposure on the counter. The biggest hurdle to Centum is the resultant illiquidity following massive foreign exits from the markets. This we believe is likely to keep the price constrained despite the evident value lying therein,” said the brokerage firm.

The analysts said the share is trading at a discount on its book value of Sh73.61 a share.

“Even under maximum pessimism, there’s money to be made. The current price of Sh26.25 [November 23] indicates a discount of 64.3 per cent on its book value of Sh73.61,” said ApexAfrica.

The company’s half-year results to end of September showed a 27.5 per cent improvement in profit after tax to Sh2.1 billion. After taking account of the results, Dyer and Blair Investment Bank placed the company’s book value per share of Sh77.58, a 2.0 per cent year-on-year growth.

Dyer and Blair said the company would likely benefit from the current political stability as well as closing significant exits and new equity investments this year.

“We believe that tail winds from an improving operating environment and political stability should augment ongoing efforts at closing significant exits and equity investments this year and lift turnover from the trading businesses,” said Dyer and Blair.