The Nairobi Securities Exchange
(NSE) has recorded renewed optimism on state-backed shares, with
Kenya Airways, Kenya Power and the
East Africa Portland Cement (EAPC)
share prices gaining by over 100 percent in recent days.
While some experts have dismissed the trend as ‘mare’ market excitement and speculation by shrewed investors hoping to gain and offload, majority believe it is genuine growths anchored on profitability, clear recovery and growth strategies.
On Thursday, the Kenya Airways share price was among the major gainers, having surged 9.8 per cent.
It has been gaining at a similar rate since January 6 when it resumed trading after a five years hiatus.
Yesterday, the airline’s share traded at Sh5.22, the highest since July 2020 when it closed at 3.83 and initially got suspended from trading following plans to nationalise it.
In 2023, the share was frozen for a further 12 months to give the carrier more time to complete the operational and restructuring process.
Stocks market analyst Gilbert Mukeshi attributed the rise in the KQ’s share price to a solid recovery plan that saw it return to profitability in the first half of 2024, for the first time in a decade, posting a net profit of Sh513 million.
“The share’s attractiveness stems from the gradual recovery over the years, with investors who have been in the cold for the past two years hoping that the profitability trend persists,’’ Mukeshi said.
He projects the share to grow further in the region of Sh8 by the end of the first quarter of the year but cautions that the airline’s negative book valuation and liquidity challenges may limit significant stock price gains.
“For investors and stakeholders, the return to the NSE offers a renewed opportunity to participate in the future of one of Africa’s most iconic carriers. The question now is whether KQ can sustain its momentum and fully capitalize on its recent gains to secure long-term stability.”
Joram Oluoch, a long-time investor at the national carrier is pessimistic of the growth, terming the current market excitement as juvenile and ‘a short time relief’.
“Nothing new. We have been here before. Another call for nationalization of the airline will see the price plummet. KQ management must use this opportunity to clear debt, improve operational efficiency and further improve profitblity. These are the main factors investors are looking at,’’ Oluoch said.
The government is the largest shareholder with a 48.9 per cent stake, followed by KQ Lenders Company 2017 Limited – comprising Equity Bank, KCB Group, Cooperative Bank, Diamond Trust Bank, NCBA Bank, I&M Bank, and Ecobank – at 38.09 per cent.
Dutch airline KLM holds 7.8 per cent with Kenya Airways employees having 2.44 per cent. About 75, 000 individuals collectively own 2.8 per cent of the national carrier through the stock market.
Last year, East Africa Portland Cement 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.
Although the contested leadership change at the cement firm has seen the share price drop to Sh29, analysts are of the opinion that it still has a chance to rise further once it gets a substantive leader.
“Stocks are about investing in the future hence firms with positive future sentiments are sure buys. News of dividend payout for EAPC, bids for Bamburi Cement buyout and the return to profitability by Kenya Power is currently guiding the market,’’ Mutemi said.
On Thursday, Kenya Power’s share closed the market at Sh7.40, having gained more than 200 per cent from Sh3.47 in October.
The listed power producer recorded Sh319 million in profit after tax for the half-year period to December 2023, amid an increase in electricity sales.
This was a comeback from a Sh1.1 billion loss recorded during the previous half-year period to December 2022, with the firm’s past years being tough ones.
Kenya HF Group Plc is another
government-linked stock that is on
steroids after concluding its rights
issue in December, having achieved
a subscription rate of 138.32 per cent.
