Sameer shares soar on upbeat outlook

Sameer Africa PLC (SMER) shares popped up 23.2% in May to wrap up the month at Ksh2.92, giving Sameer a spot on the list of the most bought stocks last month.

The shares closed Friday at Ksh2.91. At this point, Sameer shares trade 38% below where they were a year ago at Ksh4.69. But the stock has pulled up more than 52% from its one-year bottom of Ksh1.91.

Sameer shares jumped last month on the back of an upbeat outlook for 2020 and beyond. The management recently took a radical step designed to accelerate the company’s return to profit.

Notably, the management decided to pull Sameer out of the loss-making tyre business and narrow its focus to the profitable real-estate business. Consequently, Sameer expects to a turn a profit of Ksh69 million in 2020, which would be a remarkable turnaround for the company.

Sameer has been making losses for several years amid trouble in its tyre business. In 2019, the company made a loss of Ksh1.1 billion, which more than doubled from the Ksh529.3 million loss in 2018.

The loss in 2019 widened as a result of the company shutting down and writing off the tyre business. Moreover, Sameer incurred Ksh60 million in costs last year tied to payments to retrenched employees as it sought to shrink its workforce and reduce operating expenses for the long-term.

With the loss-making tyre business out of the way, real-estate will become Sameer’s main operation. The real-estate business mostly comprises rental income from commercial and residential properties. The company’s rental business generated roughly Ksh270 million in revenue in 2019, rising from Ksh240 million in 2018.

As shutting of the tyre business is expected to bring costs more under control, Sameer is shooting for Ksh185 million profit in 2021, and a possible return of dividends.