Since the company began its share repurchase program on February 6, investors have exchanged 2.48 million Centum shares on the Nairobi Stock Exchange (NSE), more than tripling the daily average on the stock previous to the program.
The increased activity reflects both the company’s repurchase plan and increased demand from other investors who are anticipating that the lower float would have a beneficial influence on the price.
Since February 6, the counter has averaged 225,545 shares each day, compared to a daily average of 110,432 in the 12 months preceding the start of the repurchase.
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Ahead of the rollout of the programme, the company got an exemption from the Capital Markets Authority (CMA) to expand the share purchase beyond the usual cap of 25 percent of the average daily trading volume for the four calendar weeks preceding the date of purchase.
The stock has, however, been trading at levels near the upper limit that the company set for the buyback, which has the effect of maximising the money the company will be spending to raise the 66.5 million shares it is targeting in the exercise.
The volume of stock that Centum intends to buy represents 10 percent of the total issued shares.
It has set the maximum share purchase price at Sh9.03 and the minimum at 50 cents.
On Monday, Centum’s share traded at between Sh8.88 and Sh9.20, but closed at an unchanged average of Sh9, moving 214,600 units.
Centum’s management, which has set aside Sh600.8 million to finance the buyback, is betting on the programme to stabilise the company’s share price and market valuation.
The company’s net asset value per share stood at Sh59.8 per share in the six months that ended September, implying an 86.6 percent undervaluation by investors trading its stock on the NSE.
Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting the market valuation besides increasing the stakes for shareholders.
