City lawyer Andrew Musangi, a kin of billionaire entrepreneur Chris Kirubi, has bought a 1.1 percent stake in tyre distributor Sameer Africa with an eye on the Nairobi Securities Exchange (NSE) listed company’s prime land holdings.
Mr Musangi, who has accumulated his stock in the company gradually, is betting that the firm will unlock the value in Sameer’s strategically located land parcels.
The lawyer, a son-in-law of billionaire businessman Chris Kirubi, bought an additional 1.2 million shares of Sameer in the year ended December, making him the company’s fourth-biggest shareholder.
His stake currently has a market value of Sh10 million. He says he intends to mop up more shares of the company, arguing that they are under-valued.
“The mistake that people make is that they see Sameer as a tyre distribution company. I see the value in its land and this will be unlocked in the future,” Mr Musangi said in an interview.
While Sameer’s mainstay tyre business has declined sharply in recent years, resulting in losses and lack of dividends over the years, the company’s land holdings could generate a substantial windfall for long-term investors.
The firm has been reporting the value of its land at cost in its balance sheet.
Its commercial properties and leasehold land were carried at Sh422.8 million in the year ended December while their market value is estimated at Sh7.8 billion, indicating a potential gain of Sh7.3 billion.
This implied gain is eight times Sameer’s market capitalisation of Sh900 million as at Friday and 6.6 times the company’s current book value of Sh1.1 billion.
The company’s share price was on a free fall from highs of Sh9.1 in May 2014 to lows of Sh1.72 in April this year, as investors reacted to a series of headwinds, including closure of the tyre plant, piling losses and write-offs of regional subsidiaries.
The stock has, however, gained 88 percent since April to trade at Sh3.23 on Friday.
Sameer does not disclose the size of its freehold land but sources estimate that the company has 85 acres in Nairobi’s Embakasi area.
Sameer, in which billionaire Naushad Merali has a controlling 72.15 percent stake, in 2016 announced plans to use its land to venture into commercial property developments to diversify away from the troubled tyre business.
The planned developments included a modern office block in Nairobi’s Westlands and a shopping mall along Mombasa Road.
In its recent communications, however, Sameer has been silent on the real estate plans but has doubled down on the tyre distribution business.