Investors have actively participated in the stock buyback program of Centum Investment Company Plc, trading a total of 4.9 million shares valued at Sh44.5 million since the initiative commenced on February 6th.
The trading volumes of Centum’s shares have witnessed a significant surge, more than tripling in size since the launch of the stock buyback program.
This suggests that the company has become a major buyer of its own shares in the open market.
Centum’s ambitious buyback program aims to repurchase 66.5 million shares over an 18-month period, concluding on August 8 next year. This endeavour could potentially cost the company up to Sh600.8 million.
For years, Centum has been undervalued on the Nairobi Securities Exchange (NSE), prompting the initiation of the share buyback as a strategic move to bridge the valuation gap.
As of the six months ending September 2022, Centum reported a net asset value per share of Sh59.8. However, this figure starkly contrasts with the market’s perception, as evidenced by the closing share price of Sh8.94.
The discrepancy indicates that Centum’s shares are undervalued by a substantial 85 per cent.
Several factors have contributed to the company’s low share price, including investor concerns about the perceived high risk associated with its previous debt-driven expansion.
The company has been actively addressing these concerns by diligently repaying its loans.
Stock buybacks, such as the one undertaken by the company, have the effect of increasing ownership stakes and earnings for existing shareholders, potentially enhancing the overall value proposition of the company’s shares.