Foreign investors grow their stake in Uchumi four-fold

Shoppers at a branch of Uchumi Supermarket in Nairobi. The retail chain’s share has gained 9.8 per cent over the past year to Sh19.75. FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• CMA filings show that foreign investors owned 26.23pc of Uchumi this July, up 20.68 per cent in March.
• The firm's share has gained 9.8 per cent over the past year to Sh19.75 and was the top performer in the 12 months to March.
• Analysts say investors expect Uchumi to perform better in the medium term, after making significant investments in branch expansion in the region in the past two years.

Foreign investors have grown their stake in Uchumi Supermarkets four-fold in the year to July encouraged by expected earnings and flat share price movements.

Filings with the Capital Markets Authority show that foreign investors owned 26.23 of the retail chain this July, up 20.68 in March and 7.57 per cent in July last year.

Uchumi’s share has gained 9.8 per cent over the past year to Sh19.75 and was the top performer in the 12 months to March when it attracted local investors including Nairobi governor Evans Kidero, Jimnah Mbaru and the supermarket’s CEO Jonathan Ciano.

Dr Kidero, a former Mumias Sugar Company CEO, owns 234,577 shares in the retail chain while Mr Mbaru, who owns Dyer & Blair Investment Bank, has 256,900 shares down from 756,989 in March.

Analysts say investors expect Uchumi to perform better in the medium term, after making significant investments in branch expansion in the region in the past two years. In October, the company announced it would open at least eight new branches in East Africa by 2014.

Dividend payout

In recent years African retail has attracted interest from investors keen to take advantage of the continent’s economic growth, which is creating a growing middle class and a new breed of consumers.

This is what is attracting foreign investors to Uchumi while its rival Nakumatt plans to invite a strategic investor from outside Kenya.

(READ: Foreign investors double Uchumi Supermarket stake)

South Africa’s retail giants Massmart, Edgars and Foschini have committed to opening outlets in Kenya next year. Massmart, which is a unit of Wal-Mart, is expected to take a 50 per cent stake plus one share in Naivas which would give the world’s largest retailer a foothold in Kenya.

Uchumi’s profit grew 20.4 per cent to Sh485.9 million in the year to June on rising sales, which stood at Sh14.2 billion up Sh13 billion a year earlier.

Increased interest in the stock started last year when the retail chain announced a dividend payout of Sh0.3 per share after a 10-year drought. It maintained the same payout this year.

Uchumi, which closed shop briefly in mid-2006 after failing to pay creditors, has returned a profit for four years in a row compared to a loss of Sh1.2 billion in 2005, signalling that its turnaround strategy is working.

The firm’s management said the declaration of the dividend is a show of confidence in its prospects underpinned by expansion plans. It targets to raise Sh1.5 billion through a rights issue in the second half of 2013 and open more stores.

Uchumi’s sluggish share, which has shed 10.9 per cent in the past six months, has seen local shareholders who had bought the stock on the cheap cash in.