By GEORGE NGIGI
Centum Investments
has changed its rules to allow it buy back shares from the market at a
time the management and board believe the stock is undervalued at the
Nairobi Securities Exchange (NSE).
The listed investment firm has in its annual report placed
its net asset value per share at Sh59 compared to current trading price
of Sh38.50 per unit, which would represent a 35 per cent undervaluation.
“The company may acquire its own shares in
accordance with Part XVI of the Act,” reads a new article which the
management hopes will be approved by shareholders during the annual
general meeting scheduled for the end of September.
Repurchase of own shares reduces the volume of
outstanding stock (supply) as some investors sell their holdings to the
company. Those remaining have a greater claim to the firm’s assets and
future cash flows on their enlarged stake—now including portion held by
the company.
This makes the company an extra class of traders in
the market, with their boards and majority owners having some
flexibility in deciding when to buy shares and at what price.
“It is prudent for a company not to allow its
shares to be disenfranchised just because the market lacks sentiment for
them,” said Centum’s chairman and largest shareholder Chris Kirubi.
Unclaimed
Centum,
formerly ICDC Investment, has in the meanwhile surrendered 51 million
shares worth an estimated Sh1.9 billion at current trading price of
Sh38.50 per share to the Unclaimed Financial Assets Authority (UFAA) in
line with regulatory requirements.
Shares and dividends are classified as unclaimed if
no action is taken on them by the owner for a period exceeding three
years and are to be handed over to the government agency UFAA.
The control of the surrendered shares means the
UFAA now has a 7.7 per cent stake in the company which makes it the
third largest shareholder behind Mr Kirubi who has a 28.3 per cent
holding and government owned Industrial and Commerce Development
Corporation (ICDC) with 22.9 per cent.
UFAA is required by law to sell the shares within a
year, indicating that if the shares are bought as a block by one
investor, the company may be shoved into a union with a large investor
who may not share its current vision.
Passage of the clause would give the company powers to buy the shares from UFAA.
Centum becomes the first firm to change its clauses to allow for the share repurchase.
Mr Kirubi noted that listed banks —which have seen their share prices slump following signing of a law capping interest rates — should consider buying back their shares to salvage their value.
Mr Kirubi noted that listed banks —which have seen their share prices slump following signing of a law capping interest rates — should consider buying back their shares to salvage their value.
The window for companies to repurchase their shares
was opened last year following passage of a new Companies Act. The
practice is common in the developed markets.
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