Tuesday, August 9, 2022

Will Mumias bubble burst or will speculators push the stock higher?

Speculation on the Mumias Sugar Company counter by local investors incentivised by its low nominal price has pushed the stock to a six-week high price of Sh2. Mumias gained 30 per cent over the past week, during which the counter saw heavy trading as bargain hunters and speculators bet on the counter that opened the week at Sh1.55, meaning an investor would only need about Sh1,600 to buy into the stock.

“Mumias Sugar edged up on the back of speculative local investor interest,” said Standard Investment Bank in a market report last week.

Well documented woes that have befallen the sugar miller have led to its share price plummeting this year, leaving it as the worst performing with a decline that is nearing 50 per cent.

Negative investor sentiment has bogged down Kenya’s largest sugar miller ahead of the Common Market for Eastern and Southern Africa lifting of quantitative restrictions on Kenya’s sugar imports.

Foreign investors have cut their exposure to Mumias shares by almost half since the beginning of the year, reducing their holdings to 82.7 million at the beginning of October, compared to 148.5 million in January.

Mumias currently has the lowest nominal price at the NSE, having touched an all-time trading low of Sh1.35 two weeks ago before enjoying a recovery seen over recent trading sessions.

The company’s management is due to face shareholders in an annual general meeting in Kisumu on December 5, when it is expected to shed light on any recovery efforts being put in place to revive the sugar miller.

Market watchers have said that the company, majority owned by the government at 20 per cent, might require an intervention from the Treasury in order to turn around its fortunes, although there has been no indication of such a move.

However, Mumias’ recovery over the past week left it as the best performing counter for the week alongside Eaagads with their 30 per cent gains. The latter gained Sh12.50 to close the week at Sh53 a share.

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