KQ, Mumias, Uchumi shares hit fresh lows on losses
A man monitors online trading at the Nairobi bourse. PHOTO | FILE
What you need to know:
Atlas also happens to be the worst performing stock on the exchange over a one-year period having shed 88 per cent of its value to trade at Sh1.15 — which is the lowest nominal price of any stock at the exchange.
Kenya Airways (KQ), Mumias Sugar and Uchumi have joined the list of firms trading below fare value at the Nairobi Securities Exchange as their financial woes take a toll on valuations at the bourse.
There are now six firms trading under-par at the exchange compared to three a year ago. The three join Sameer Africa, Express Kenya and Olympia Capital on the list.
KQ’s stock is currently trading at Sh4 a share representing a Sh1 deficit on its face value of Sh5 while Uchumi and Mumias are trading at Sh3.85 and Sh1.20 respectively, with their par values being Sh5 and Sh2.
There are no laws barring accompany from trading below par value or penalising such occurrence, meaning that the only down side would be a hit on investor confidence in the stock.
“From a regulatory point of view, the shares falling below par value is not very important, because we do not have laws that penalise such. However, from an investor point of view, it becomes a factor in forming sentiment. For instance, when Mumias first fell below its face value, there were some who were pushing for the stock to be delisted or suspended from trading,” said Kingdom Securities senior analyst Mercyline Gatebi.
In other jurisdictions such as South Africa, companies are not required to assign a nominal or par value to shares upon issuance, while East African States including Kenya, Tanzania and Uganda require that one does so.
The only company trading at the NSE without a par value is Atlas Africa Industries, having come into the market through a cross listing from the London Stock Exchange. The only other cross-listed company at the NSE is Umeme Ltd, the Ugandan power firm, whose primary listing is on the Ugandan bourse.
Worst performing
Atlas also happens to be the worst performing stock on the exchange over a one-year period having shed 88 per cent of its value to trade at Sh1.15 — which is the lowest nominal price of any stock at the exchange.
Sameer, Express and Olympia have traded for extended periods below par value. KQ, Mumias and Uchumi can, however, trace their share price woes to poor financials and corporate governance issues in the recent past.
The airline’s share has been hobbled by the company’s record-setting losses in the past two financial years as it carries the cost of its ill-fated expansion project dubbed Project Mawingu.
KQ announced a record Sh26.6 billion loss last month for the full-year ending March 2016, compared to Sh25.7 billion the previous year.
Although showing signs of recovery as it streamlines its operations to cut financial leakages, the airline paid the price for unfavourable fuel hedges and foreign exchange turbulence as the shilling weakened against the dollar, resulting in the massive loss.
Uchumi has been facing mounting claims from creditors, who had sought to have the retailer liquidated in order to get their dues. Uchumi, however, received a boost on Friday as the case was dismissed by the High Court.
Mumias Sugar, which posted a half-year to December net loss of Sh1.58 billion, has been tied down by corporate governance issues that have seen its top management changed as it continues to seek a bailout from the government.
