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Gains from NSE dead stocks beat blue-chip firms in 2024
Among the larger stocks, the leading gainers’ list has been dominated by banks, led by KCB Group and I&M Holdings at 81 percent, to Sh39.50 and Sh32.10 per share, respectively.
Penny stocks at the Nairobi Securities Exchange (NSE) were the surprise top gainers this year, helped by speculative trading and a return to profits that boosted their dividend earnings.
East Africa Portland Cement (EAPC) led the market with share price gains of 306.9 percent in the year to date, followed by Kenya Orchards (259 percent) and Kenya Power at 182.4 percent.
They emerged top in a market dominated by blue chip stocks like Safaricom, Equity Bank, KCB and East Africa Breweries Limited (EABL).
State-owned power producer Kenya Electricity Generation Company (KenGen) is up 71 percent and insurance firm Liberty Kenya has gained 76.5 percent to join the list of top gainers as investors seeking to enter the market at bargain prices lifted the shares on speculative trades.
The triple-digit gains came as the stocks with low nominal prices emerged from years of underperformance.
Among the larger stocks, the leading gainers’ list has been dominated by banks, led by KCB Group and I&M Holdings at 81 percent, to Sh39.50 and Sh32.10 per share, respectively.
EABL was also a top performer with a gain of 50 percent to Sh172.50, while Safaricom, the largest listed firm by market capitalisation, gained 26 percent to Sh17.50 a share.
Blue chip stocks fared better during the bear run at the NSE, which lasted a few years, due to their solid fundamentals and exposure to foreign investors, who prefer to trade in large companies with ample liquidity and a track record of paying dividends.
This year, however, local investors increased their participation at the NSE, helping drive up activity and demand for the smaller stocks, which are within reach for lower-sized investment tickets.
Analysts said the potential for dividends and corporate deals involving the companies also boosted their share prices.
“EAPC opened the year trading at a deep discount. Developments in the cement sector with the acquisition of Bamburi have highlighted its underlying value, coupled with its return to profits and issuance of a dividend,” said Ronnie Chokaa, a senior analyst at Capital A Investment Bank.
“Kenya Power was also boosted by the dividend payout, as was KenGen with both companies offering quite attractive yields.”
EAPC, this year, announced a dividend of Sh1 per share, its first payout in 11 years after returning to profitability with a net profit of Sh1 billion in the year to June 2024.
The company’s share price jumped from Sh8 in January to Sh32.85 on December 23, having touched a high of Sh55 in the intervening period.
Similarly, Kenya Power paid its first dividend in six years at Sh0.70 per share after recording a net profit of Sh30.08 billion for the year to June 2024.
The utility firm’s share price, which stood at Sh1.42 at the beginning of the year, jumped to Sh6 after the financials were announced, before retreating to the current price of Sh4.04.
KenGen meanwhile saw its share price rise to Sh4.60 after it announced an enhanced dividend of Sh0.65 per share (up from Sh0.30 in 2023), having opened the year at Sh2.01 a unit. It is currently trading at Sh3.41.
Kenya Orchards share rose after the company announced in June that its majority owners were looking to sell their 84.4 percent stake in the Njoro-based firm to Kenyan firm Africa Mega Agriculture Centre (Amac).
Kenya Orchards, which manufactures spices and other food additives, did not disclose the value of the deal.
At the time of the announcement, the company’s share was trading at Sh19.50 but has since jumped to Sh70, largely on speculative trading on thin volumes due to the uncertainty over the pricing of the offer.
Larger firms also saw their shares influenced by corporate actions, especially mergers and acquisitions.
KCB announced plans earlier this year to sell the National Bank of Kenya to Nigeria’s top lender Access Bank Plc in a deal valued at about Sh13.2 billion.
The banks also reinstated dividends with a Sh1.50 per share interim payout at the half-year to June following an 87 percent growth in net profit to Sh29.1 billion.
Corporate actions also contributed to I&M Group’s share price growth. Private equity fund Africinvest bought a 10.13 percent stake in the bank from British International Investment (BII) in June, paying a reported Sh6.5 billion for the stake, which represented a premium of nearly two times on the lender’s then valuation of Sh3.4 billion at the NSE.
This pointed to the undervaluation of the lender at the market, triggering a rally in the share price from Sh20.50 to the present Sh32.10.
