Listed battery distributor Eveready East Africa is the most expensive stock on the Nairobi Securities Exchange (NSE) relative to its net assets, with its overvaluation driven by years of losses.
Its equity or shareholders’ funds dropped 84.6 percent to Sh6.3 million in the year ended September 2021.
Meanwhile, its 210 million issued shares traded at Sh0.96 each yesterday, giving it a market value of Sh201 million which is 31.9 times the book value.
This is higher than the multiple for all NSE firms in a positive net asset position including Safaricom whose Sh1.4 trillion market value is 7.9 times its shareholders’ funds of Sh178.8 billion.
There are however a number of firms including Kenya Airways , Mumias Sugar , TransCentury , Home Afrika , and Uchumi Supermarkets which are trading in negative equity, meaning there is nothing to back their share prices.
Eveready has been in financial distress in recent years due to a shift in customer preference from dry cell batteries, which it used to manufacture locally at the Nakuru factory and which it closed in 2014.
The company also pulled out of a distributorship agreement with American battery maker Energizer in 2016, accusing the firm of taking control over product distribution and company margins.
Eveready now focuses on the Turbo brand of batteries and its sales have been dwindling, dropping by nearly a third to Sh89.8 million in the year ended September.
Among those with positive equity, Eveready has the widest margin between the real assets and the perceived value of the firm assigned by investors through share price.
The five largest firms on the NSE, which are also its most profitable, have a much smaller spread between these values.
Equity Group ’s Sh191.5 billion market capitalisation is 1.2 times its book value of Sh163.3 billion while EABL ’s valuation of Sh122.6 billion is five times its book value of Sh24.5 billion. KCB and Co-op Bank are in the meantime undervalued by investors, having a market cap that is lower than their book values.KCB’s net assets stood at Sh163 billion at the end of September 2021, while its market capitalisation stands at Sh142.7 billion. Co-op Bank’s book value of Sh95 billion sits above its market cap of Sh75.4 billion.