This food stock is trading at 24% discount to what investors were paying for it in June 2019
The coronavirus disease outbreak continues to weigh on stocks. The Nairobi All Share Index (NASI), which tracks the performance of all stocks on the Nairobi Securities Exchange, is down 13% since the year began.
Indeed, stock investors have been on a selling spree to raise cash to survive as the Covid-19 situation has slashed the incomes of many households. Companies too are struggling with reduced sales and many are cashing out on stock investments to shore up their liquidity, hence fuelling the stock market selloff.
The selloff has left some stocks trading at steep discount. Unga Group Ltd (UNGA) is one of them. Unga Group is engaged in the manufacturing and sale of human food and animal feeds. It is the name behind popular maize and wheat flour brands such as Jogoo, Hostess, Exe and Hodari.
At Ksh28.75 a share, Unga Group stock now trades at 24% discount to the as much as Ksh38 price that investors were paying for it in June 2019. Moreover, at this price Unga Group stock trades 15% below what investors were paying for it at the start of the year.
Unga Group is one of the few listed non-farming food products companies in Kenya.
Unga Group takeover by American company
Unga Group was the subject of a takeover bid by an American company two years ago. In 2018, Seaboard Corporation sought to acquire Unga Group for Ksh40 a share. But the takeover bid flopped after Seaboard failed to secure enough shareholder support.
Unga Group shareholders rejected Seaboard’s buyout offer because they believed it undervalued the company. At the time Seaboard tabled its offer, Unga Group shareholders felt the stock was worth at least Ksh67 apiece.
Seaboard, which has the support of an investor group called Victus, promised to revisit its takeover bid for Unga Group.
Unga Group profit warning and financial results
Unga Group’s financial year ends in July. The company delivered a profit of Ksh544.8 million on revenue of Ksh17.9 billion in its financial ended June 2019. It paid a dividend of 50 cents per share out of the profit it made in fiscal 2019.
But even as Unga Group stock trades at discount because of the coronavirus selloff, the company in March warned that its profit for the financial year ending June 2020 may fall at least 25% relative to the previous financial year. The company cited low demand for animal products and high costs of maize and wheat as weighing on its bottom-line. Unga Group’s profit fell 30 in fiscal 2019.