Market analysts say the fundamental issues ailing some of the affected firms have persisted longer than the current bear run, indicating a weak investment case for the stocks. FILE PHTO | NMG The share prices of 17 Nairobi Securities Exchange (NSE) #ticker:NSE listed firms have fallen below Sh5 per unit in a stock market bear run attributed to a mix of corporate governance weaknesses, a tough economy and over-indebtedness.
Five of the stocks are trading below one shilling, effectively making them penny stocks by Kenyan standards.
The bloodbath at the bourse reflects the huge paper losses investors have suffered in the current market bear run that has pushed the NSE 20-Share Index to a 10-year low of 2,539 points as at close of trading last week.
Collectively, the 17 firms have seen their market capitalisation fall by 45 percent or Sh39.1 billion to Sh47.8 billion since the beginning of the year.
Kenya Airways #ticker:KQ has accounted for the biggest fall in capitalisation, losing Sh34.1 billion to be valued at Sh16.4 billion after its share price dropped from Sh8.90 to Sh2.89.
Market analysts say the fundamental issues ailing some of the affected firms have persisted longer than the current bear run, indicating a weak investment case for the stocks.
Investors would ordinarily eye a falling market as an opportunity to buy under-valued stocks, positioning for future capital gains.
Some companies such as Mumias Sugar #ticker:MSC , Uchumi #ticker:UCHUM and Kenya Airways are in negative equity position, indicating a complete erosion of shareholder wealth that would require capital injection for the firms to return to being going concerns.
“Whether these companies have an investment case is purely case-by-case specific, but most are facing corporate governance issues, and/or, their business model is drastically challenged,” said Harrison Gitau, head of research at ApexAfrica Capital investment bank.
The stocks include hitherto blue chips such as Kenya Airways (Sh2.89) and Kenya Power #ticker:KPLC (Sh3.67), insurance firms Kenya Re #ticker:KNRE (Sh3.05) and CIC Insurance #ticker:CIC (Sh3.00), and lenders HF Group #ticker:HFCK (Sh3.86) and National Bank of Kenya #ticker:NBK (Sh3.75).Others are Eveready #ticker:EVRD (Sh1.05), EA Cables #ticker:CABL (Sh3.62), Olympia Capital #ticker: OCH (Sh2.15), TransCentury #ticker:TCL (Sh3.62), Flame Tree Group #ticker:FTGH (Sh2.87) and Sameer #ticker:FIRE (Sh3.75).Uchumi (Sh0.32), Home Afrika #ticker:HAFR (Sh0.58), Nairobi Business Ventures #ticker:NBV (Sh0.90) and Mumias Sugar (Sh0.30) have been trading below Sh1 for some time, as was fashion retailer Deacons #ticker:DCON (Sh0.45) before its suspension in November 2018 for going into administration.The […]