Money Markets
TransCentury CEO Gachao Kiuna. The company plans a rights issue. PHOTO | FILE
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- TransCentury was valued at Sh13.35 billion upon entering the stock market in July 2011 when it listed by introduction some 267 million shares at Sh50 each.
- The share price has since dropped to Sh16.10, meaning the company is now valued at Sh4.51 billion.
- Analysts contend that the investors who had valued the stock at Sh50 in the over-the-counter (OTC) market—hence the similar listing price— may have been too optimistic in their valuation.
TransCentury Limited
shareholders have seen the value of their holdings in the company
plummet by two-thirds over the past four years, a sign that the share
may have been too optimistically priced during its listing by
introduction.
TransCentury which started as an investment club in 1997,
was valued at Sh13.35 billion upon entering the stock market in July
2011 when it listed by introduction some 267 million shares at Sh50
each.
Immediately upon listing it climbed to what remains its all-time high of Sh57, before it started to decline.
Over the intervening period the share price has
dropped to Sh16.10, meaning the company is now valued at Sh4.51 billion.
TransCentury has since listing issued more shares in the market to take
its total to 280.28 million.
Analysts contend that the investors who had valued
the stock at Sh50 in the over-the-counter (OTC) market—hence the similar
listing price— may have been too optimistic in their valuation.
“The buyers in the OTC market may have failed to
interrogate the price properly. If the stock was properly priced, the
market’s price-finding mechanism even with some depreciation would have
seen it settle at a level near the listing price,” said ABC Capital
corporate finance manager Johnson Nderi.
“Sometimes investors in the OTC market are willing to pay a premium to access a scarce stock,” Mr Nderi said.
The share had been traded at the OTC market between
2009 and 2011. Having come in at Sh50, its price oscillated for a time
between Sh40 and 45 partly due to a lack of liquidity given that it was
only traded among a limited number of investors.
The recent slide has come at a time when the
company was selling off its 34 per cent stake in the Kenya-Uganda
Railway Holdings Limited (KURH) which saw it earn Sh3.8 billion. The
price was 21 per cent below the recorded fair value of Sh4.8 billion.
The Sh1 billion loss on fair value was partly to
blame for the company’s Sh2.2 billion net loss for the financial year
that ended in December 2014.
Going forward, analysts see the company recovering
through expected improved performance from its engineering, power and
metals businesses.
Standard Investment Bank analysts said in a note on
the company on Monday that development of the Menengai geothermal plant
will improve the performance of TransCentury’s power division.
“With regard to oil, gas and mining sectors, the
company sees recent discoveries as opportunities for growth. Civicon’s
(a subsidiary) business has a strong pipeline of signed contracts which
is positive for future revenue growth for TransCentury engineering
division,” said SIB.
According to Mr Nderi, the business remains solid,
but there is some concern over the liability side especially on the
convertible Eurobond issued in 2011.
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