NSE bear run erodes value of agriculture, loss-making firms

Money Markets

Cytonn chief investment officer Elizabeth Nkukuu. PHOTO | DIANA NGILA 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

The Nairobi Securities Exchange (NSE) bear run that started last year has since the beginning of the year continued to erode the value of a good number of listed companies, mostly those showing massive losses or negative net worth and agriculture stocks.

Top on the list of losers is Uchumi Supermarkets which currently has negative assets implying that its assets cannot pay for its liabilities if called today. That means it is in technical insolvency.

Other leading losers include National Bank of Kenya (NBK), Home Africa, Atlas Development and TransCentury.

Chief investment officer at Cytonn Investments, Elizabeth Nkukuu, said the cause of the fall in prices was mainly the negative news that had been published relating to the companies.

“In the case of Uchumi Supermarkets, people thought that the coming in of a new chief executive would signal the end of the problems and an immediate turnaround. But that is not the case. Investors have realised it is a longer journey; suppliers have introduced new issues, money needs to be raised,” said Ms Nkukuu.

Recently, suppliers agreed to convert Sh1.8 billion the company owes them into equity as part of plans aimed at easing the tight financial situation the firm faces.

The company is in the process of raising Sh5 billion. Incidentally it is valued at only Sh1.4 billion in market capitalisation as at May 26.

For the NBK, the losses it made last year and this year’s first quarter increase in loan loss provisions seem to have put a damper on investor appetite for the share, according to an analysis by Genghis Capital.

“The lender - which has received a lot of negative publicity after six top managers were dismissed in the light of alleged mismanagement – [had] loan loss provisions increased significantly, further dampening prospects for the lender,” said Genghis Capital.

Despite the bank turning out a profit in the first quarter after last year’s record loss, its loan book contracted by 5.3 per cent to Sh66.3 billion.

READ: NSE investors hope for a turnaround after bear run

Also losing considerable value in the past five months are two tea-growing and trading companies, namely, Kapchorua and Williamson, largely thanks to falling international prices and a strengthening shilling.

Data shows that tea prices fell consistently from the beginning of the year, having started at $2.73 on average per kilo to last week’s price averaging $2.14 a kilo.

The price came to as low as $2.01 a kilo last month, representing a decline of 26 per cent or just about a quarter relative to the start of the year.

At this time last year, prices stood at an average of $2.87 per kilo, showing the declining fortunes in the tea agribusiness.