Centum Investment Company Plc plans to take measures to address the firm’s undervaluation on the Nairobi Securities Exchange (NSE) where its stock trades at less than a third of the value of net assets.
The company’s board of directors said at the virtual annual general meeting held on Friday that the big valuation gap has persisted and that it is considering several strategies to fix it.
“The share price does not reflect the value of the share that you are holding,” Dr Laila Macharia, Centum’s Vice Chairperson, told shareholders.
“We do understand that this is a matter of concern to shareholders and board and management as well and so we have explained that we will be taking on board certain initiatives to address the main drivers of the gap.”
Centum’s share price closed at Sh17 on Friday, rising 21.35 percent from lows of Sh14.05 recorded on July 27.
The stock, however, still trades at a massive 72.9 percent discount compared to the company’s net asset value per share of Sh62.9 as captured in the financial results for the year ended March.
Centum has explored various actions to address its low share price. These include buying back its own shares, a move that will reduce the volume of outstanding volume of stock and increase the stakes of continuing shareholders.
The stock buyback strategy has, however, not been implemented years after it was first proposed. Other measures are raising dividend payouts and improving earnings by reducing costs and selling subsidiaries with weak cash-generation potential.
Centum also believes its weak share price is as a result of investors’ perception of risk and not fully understanding its business model. The investment firm says it has dealt with the risk perceptions by reducing debt and increasing investments in liquid and defensive assets including government bonds.
Centum has also structured its operations to enable subsidiaries to borrow on their own without relying on the parent company to arrange or guarantee the obligations.