Troubled NSE firms hit by a massive share price erosion

An investor monitors trading at the Nairobi Securities Exchange. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Athi River Mining tops the list of big companies whose shares have tanked, shedding 63 per cent in one year, followed by troubled lender National Bank of Kenya, which has lost 60 per cent of its value, and retail chain Uchumi (53 per cent).

Nairobi Securities Exchange (NSE) investors have severely punished loss-making and highly indebted companies as well as those with corporate governance issues, causing their stocks to shed at least 40 per cent of market value in the past 12 months. 

Athi River Mining tops the list of big companies whose shares have tanked, shedding 63 per cent in one year, followed by troubled lender National Bank of Kenya, which has lost 60 per cent of its value, and retail chain Uchumi (53 per cent).

Also in the list of stocks that have come under the most pressure in the bear market are troubled sugar miller Mumias, which has shed 40 per cent of its value, national carrier Kenya Airways (40 per cent), and East African Cables (53 per cent).

Other casualties of the share price battering on the Nairobi Securities Exchange (NSE) are investment firm TransCentury (65 per cent), and Atlas Development and Support Services (86 per cent).

READ: NSE reclaims half of market capitalisation it lost in January

Uchumi’s share erosion effectively began with last year’s exit of top managers and directors and the release of a forensic audit report showing insiders had become major suppliers of the company, exposing it to insider theft.

Uchumi has since fallen into a deep pit of losses that have left it insolvent with liabilities in excess of assets.

READ: Analysts paint a gloomy picture of Uchumi share’s future

“This clearly shows that investors are getting fed up with poor results and bad corporate governance and want an end to this. Effectively it means companies that are not being favoured by the business environment should be restructured,” said Raymond Kipchumba, an investment analyst at ABC Capital, a subsidiary of ABC Bank Group.

The stocks have suffered disproportionately (shedding 40 per cent or more) relative to the NSE 20 Share Index where the bear run has eroded nearly a quarter of wealth in the past 12 months.

Analysts at Investment firm Cytonn said the plummeting of share prices has been linked to information investors have been getting about the companies, much of which has been negative.

“This fall in prices has everything to do with the fact that investors react to information they receive and often choose to cut their losses by selling their shares,” said Elizabeth Nkukuu, chief investment manager at Cytonn.

Ms Nkukuu said investors continuously monitor the performance of their investments and will not continue holding where the future is uncertain.

“It is possible to anticipate some of the problems that companies experience by looking at their operations,” she said, adding that for Uchumi it was low stock, lack of variety on the shelves and serious governance issues that emerged thereafter.

The retail chain has recently sold a number of its branches as it sought to restructure its balance sheet.