TransCentury share price has gone up 36 per cent a day after it announced intentions to “voluntarily” de-list from the Nairobi Security Exchange (NSE), signalling a strategy by investors to cash out on the stocks.
It traded at Sh1.93 on Friday from its recent lows of Sh1.42, with experts noting that the bulk of the gains came in the last two days after the intention to de-list was announced.
On Thursday, the investment firm trading under NSE's Alternative Investment Market Segment made a cautionary announcement through the bourse, informing shareholders and the investing public that it had commenced a process that may result in material changes in the Company’s listing status.
“The completion of the process is subject to regulatory and shareholder approvals. Shareholders and the public are therefore advised to exercise caution when dealing in the shares of TC,” Company SecretaryVirginia Ndunge said in the notice.
Its shares closed the day at Sh1.76 after the announcement.
Investment experts have now attributed the excitement on the share to speculation and capital preservation.
“It can be attributed to cartel like behaviour from the majority shareholders to buy as many shares from the market and then leave the minority with worthless shares that they can't sell,” financial expert and economist Mihr Thakar told the Star.
He also noted that speculators could be looking for a final gain “sell to the next fool” or a misunderstanding on the nature of the transaction.
“The wording of the cautionary statement merely suggests a delisting, which may have been misinterpreted as "buyout",” Thakar said.
According to Thakar, the company is in negative equity of Sh3 billion.
Its half year 2019 loss, normalised for a one off gain of Sh1.3 billion, was Sh682 million, down slightly from Sh685 million in the previous year.
“Since the full year 2019 results do not seem to be available yet, the debt restructuring exercise undertaken last year may have seen further improvement in terms of finance costs,” he notes.
Johnson Denge - investment analyst and director at Pep real estate development and contractors noted that TransCentury delisting is voluntary, hence one of the reasons for the spike in the share price.
This is mainly on investor speculation on the strategic reasons behind the proposed delisting.
“Reasons include capital preservation in relation to the cost of remaining public and reward investors with income and EPS (Earning Per Share) and strategic move, for instance the intrinsic value of the shares is higher than the price that has been trading on the bourse,” said Denge.
He noted that the firm remains strong on fundamental and strategy despite recent liquefy ratios and believes investors are reacting to management confidence in the company being undervalued.
The company which listed by introduction at the NSE in 2011, has since said the decision is in line with the ongoing strategic initiatives.
These include delivery of commercial opportunities and driving pipeline growth, debt re-profiling to match cashflows, fundraising to unlock growth and accelerating execution of emerging opportunities.
Chief executive officer Nganga Njiinu said the firm has received interest from potential financiers who would provide capital that is structured in line with its strategic plan.
“We, therefore, want to position the business to access these additional sources of growth capital to be able to capitalize on the great opportunities we have created in the last three years,” Njiinu said.
If approved, all the issued ordinary shares of the company comprising 375,202,766 shares of par value Sh0.50 each shall be de-listed.
The delisting comes at a time when some of the Group's subsidiaries are struggling to remain afloat.
Its subsidiaries include East African Cables, Civicon Ltd, AEA Ltd (formerly known as Avery East Africa) ,Tanelec Ltd (based in Arusha, Tanzania) and Kewberg cables and braids (based in South Africa).
East Africa Cables has been facing liquidation over default on loans owed to its financiers, mainly banks.
In May, SBM Bank (Kenya) rescinded its liquidation plans and instead crafted a debt settlement and restructuring agreement, giving a much needed relief.
TransCentry's cash cow-Civicon Engineering and construction company is also going south. It closed shop in Uganda in 2018.
Its Kenyan operations are also near closure, with the company struggling with non-payment of salaries and suppliers who have engaged auctioneers to recover their monies.
The Group’s activities are around manufacturing, engineering, construction and logistics.