Centum Investment Company is taking a third stab at buying back 10 percent of its issued shares after previous attempts fell short due to the market price surpassing the buyback execution price.
The Nairobi Securities Exchange (NSE) listed investment firm is targeting 55.7 million shares in the third buyback, which is equivalent to 10 percent of its issued shares.
The company is asking shareholders to approve the buyback in its upcoming annual general meeting (AGM) on September 29, where it has assigned the offer at a minimum price of Sh15.10 and a maximum of Sh15.51 per share.
The buyback price cap however represents a 14.1 percent discount on the company's closing share price of Sh18.05 as of Monday, potentially exposing the latest buyback to the pricing conundrum that hurt the previous efforts.
At the NSE, Centum has traded above the Sh15.50 level since July 29, with the price peaking at Sh19.30 on August 4. The stock has gained 30 percent this year, and is trading at levels last seen in October 2020.
“As an ordinary resolution, that the company be and hereby is authorised to undertake a share buyback programme and purchase up to 55.7 million ordinary shares of the company…through on market purchases at the NSE at a maximum price of Sh15.51 per ordinary and minimum price of Sh15.10 per share, over a period of 18 months from the date of this resolution,” said Centum in its notice for the AGM.
Ahead of its potential approval by shareholders, the planned buyback would be hard to execute under normal trading rules of the NSE, unless the share price comes down in the coming weeks.
The market is governed by a daily price movement limit of 10 percent in both ways relative to the previous day’s closing price, unless there is a material announcement relating to the company in question.
For instance, a share that closes the day at Sh18 would trade within a corridor of between Sh16.20 and Sh19.80 in the following day’s trading session.
The company also retains the right to amend the terms of the buyback ahead of the AGM, before it is formally approved by shareholders.
The company took the buyback route after deeming its shares to be undervalued at the NSE for years in relation to its net assets.
Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting the market valuation besides increasing the stakes for continuing shareholders.
Centum first ran a buyback programme between February 6, 2023 and September 20, 2024, targeting 66.54 million shares which represented 10 percent of its 665.44 million issued shares. The issue had a price cap of Sh9.03 per unit, and a floor of Sh0.50.
The offer netted 10.84 million shares, representing 16.3 percent of the buyback target, largely due to the price of its share in the market rising past the buyback cap for a period within the 18 months the sale was open to shareholders.
Centum then extended the offer for a second phase running until March 2026, while capping the execution price at Sh9.51 per unit.
By the time the second sale opened on October 1, 2024, the stock was trading at a low of Sh9.40 and a maximum of Sh10.40. The price rallied further through 2025 and into 2026, trading at a range of between Sh10.30 and Sh15.60 within the offer period.
This meant that Centum was only able to add 150,800 shares to the buyback pile, meaning the company clawed back a cumulative 10.99 million shares in the three years, representing an achievement of 16.76 percent of its original buyback target.
