Shoppers at an Uchumi outlet in Nairobi. The company plans further expansion once its rights issue is done. Photo/FILE
By JOHN GACHIRI
In Summary
- The listed retailer touched a one-year low of Sh12.50 before closing at an average price of Sh12.95 in Thursday’s trading.
- Analysts said the gradual drop is the result of investors’ anticipation of the rights issue.
- The present price levels are also near the last price, Sh12.54, at which it traded before it was suspended from the NSE in 2006 following near collapse after an infamously bungled expansion.
Uchumi Supermarkets share price continues to test new lows as the market eagerly awaits details of its rights issue and the planned expansion.
The listed retailer touched a one-year low of Sh12.50 before closing at an average price of Sh12.95 in Thursday’s trading.
Analysts said the gradual drop is the result of
investors’ anticipation of the rights issue, but also because of its
fundamentals.
“In terms of performance, the company is likely to
post reduced profitability as a result of increased overheads. However,
the stock appears discounted given the scope of its operation and
increased capex,” said Eric Munywoki, a research analyst at Old Mutual
Securities.
Even at Sh13 the retailer was trading at below its
Sh14.50 debut price of June 30, 2011 when it resumed trading on the
Nairobi Securities Exchange (NSE) after a five-year suspension.
The present price levels are also near the last
price, Sh12.54, at which it traded before it was suspended from the NSE
in 2006 following near collapse after an infamously bungled expansion.
Analysts at Standard Investment Bank said the
rapid expansion of the fourth largest retailer is meant to provide
enough shelf space ahead of the planned entry of larger and better-oiled
international chains.
The company plans further expansion once its rights issue is done.
Uchumi is already struggling to reclaim market
share lost to rivals Tuskys, Naivas and Nakumatt, which have in the
recent past expanded faster.
“Kenya’s top retailers are racing to consolidate
their market shares ahead of the entry of cash-rich global retailers
such as South African Massmart that was looking to buy a majority stake
in Naivas,” said a report by Standard Investment Bank.
Carrefour of France has said it will be a tenant at Centum Investments’ Two Rivers development in Runda.
Developers are in turn also putting up malls to
cater for this demand as seen by the shopping space in the pipeline,
which is expected to quadruple in the next five years.
“The retail sector in Nairobi has been
characterised by low vacancies and steady demand, especially for new and
more diverse retailers.
“Retail centres in Nairobi currently have Gross
Leasable Area (GLA) of less than 30,000 square meters but going forward,
this could change.
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