Jubilee Holdings #ticker:JUB is preparing to buy back its own shares, giving it an option to repurchase the stock when it is trading below its fair value.
The insurer has asked shareholders to amend its articles of association to authorise the unique transactions in the future.
Nation Media Group #ticker:NMG is the first Nairobi Securities Exchange-listed firm to make a firm decision to repurchase its stock, offering to buy a maximum of 20.7 million units at a maximum price of Sh25 apiece between June 28 and September 24.
“The company may from time to time, with the sanction of a special resolution of the shareholders, acquire its own shares in accordance with the provisions of Part XVI of the Companies Act, 2015 and any guidelines that may be stipulated by the Capital Markets Authority for share buyback transactions by listed companies,” reads the proposed resolution to be voted on by Jubilee’s shareholders on June 29.
Share buybacks are common in the Western world where they are ideally implemented when companies believe their stock is trading at a major discount to the intrinsic value.
These transactions have the effect of forcing share prices up besides increasing the stake of continuing shareholders. Companies typically buy back shares when they have more cash than they need to fund their day-to-day operations.
Jubilee’s share price is currently trading at about Sh280, which is 38 percent below its net asset value per share of Sh451 recorded in the year ended December.
It is the most profitable insurer in the country and has not cut dividends since listing in 1984.
Share repurchases are expected to become more common on the Nairobi Securities Exchange as undervalued companies seek to close the valuation gap.
