Foreign investors buy Sh14bn worth of EABL shares

A quality assurance official inspect a beer at EABL plant. Photo/FILE 

By WASHINGTON GIKUNJU
 

 

In Summary

• EABL shareholder returns show foreign companies were holding 29.4 per cent of the brewer’s shares as at May 10.
• This means foreign investors have snapped 39.2 million EABL shares in the past one month worth roughly Sh14.3 billion.

Foreign investors have increased their shareholding of beer maker EABL shares by nearly five percentage points in the past one year, buying shares worth more than Sh14.3 billion, latest shareholder filings of the company have showed.

EABL shareholder returns show foreign companies were holding 29.4 per cent of the brewer’s shares as at May 10, compared to 24.4 per cent on May 14 2012.

This means foreign investors have snapped 39.2 million EABL shares in the past one month worth roughly Sh14.3 billion going by Wednesday’s share price of Sh365 per share. The actual purchase cost may however be different since the firm’s share price fluctuates on a daily basis.

Driven by a huge demand by international investors, EABL touched a record high price of Sh426 per share earlier this month, but has since declined to yesterday’s level as the appetite by foreigners appeared to be waning.   

“EABL shed 3.2 per cent, renewing a downward momentum after a stable session in the previous day,” said Standard Investment Bank analysts while commenting on Wednesday’s trading. “Foreign investor buying remained healthy on the brewer but bids were placed at lower prices,” it added.

(Read: Foreigners’ appetite for EABL share sustains rally)

EABL is majority owned by London-based brewer Diageo, which has however registered an entity known as Diageo Kenya Ltd that is recognised as a local investor in its shareholders’ roll.

Nominee accounts

Diageo Kenya Ltd has a 42.82 per cent direct stake, Diageo Holdings Netherlands 4.5 per cent and Guiness Overseas Ltd 2.6 per cent. Most of the other shares of the brewer are held by investors hidden under nominee accounts.

EABL’s consistent surge in recent months has generated speculation that the firm could be about to make a material announcement with a major impact on its medium term outlook.

Stockbrokers and transaction advisors have however claimed they are not aware of any ongoing material transaction. In its research report released this week, Standard Investment Bank said EABL was over-valued, giving it a target price of Sh205.60.

“The possibility of the brewer improving its cash flow through working capital efficiencies would be positive to our valuation but we see that chance as low in the near term as investments are likely to remain high,” said SIB analysts.

The investment bank says investors’ valuation of brewers across Africa has increased, “with EABL leading the momentum given its regional positioning and relatively good liquidity.”

The stock is trading at a trailing price earnings (PE) ratio of 28.01, and an earnings per share (EPS) of Sh13.46.

“We feel the Alcoholic Drinks Control Act which came into effect in 2010 is going to raise compliance costs for the industry, particularly with regards to packaging (which EABL is contesting in court). On pricing, we expect the government to increase excise taxes,” say SIB analysts.