Buy Britam, Housing Finance long-term

Housing Finance (HF):

Following the announcement by HF that it would seek Sh3.5 billion in a rights issue two weeks ago, the mortgage lender’s share surged by 7.7 per cent within five days to reach Sh48.75 per share and an intra-day trading high of Sh49.

The rally was attributed to increased demand from local investors. The price surge was irrespective of the share dilution that often characterises counters offering a rights issue.

With HF, the lender is offering the rights at a bargained price of Sh30 per share for 117 million shares, with a share going for every two already held.

The offer is expected to open on February 19 and run until March 13. According to Old Mutual Securities, the free floating shares of HF of about 40 per cent of the total is small, given Britam’s willingness to take up its rights. Britam currently holds 46.08 per cent stake.

According to Eric Munywoki, a research analyst at Old Mutual Securities, the book record closure means that anyone who buys shares thereafter is not eligible for any rights.

“That was largely the reason behind the big fall as the investor demand scrambling for the stock dried out,” he says. But Mr Munywoki is quick to point out, though, that the dip provides value investors with an opportunity to take position.

“A range of Sh42 is a good point to come in. Investors are likely to see the fruits of the rights issue reflected in the financial reports of HF in less than a year,” he notes. “This means the stock is a buy for those looking to invest on long-term, and a hold for those already in it.”

Over the past one year, HF has traded at a low of Sh29.50 and a high of Sh55 per share. On Friday, the counter opened at Sh40 per share before quickly tumbling 7.14 per cent in the early trading session to Sh39.

BRITAM:

Since September, last year, when Britam rallied to an all-time high of Sh40 per share, the stock has struggled to go above Sh30 per share.

This has largely been due to negative reports that the company’s four former managers may have illegally transferred Sh4 billion from Britam’s accounts. Currently, though, Britam is seeking to recover the money in an on-going court case.

Nevertheless, this has not deemed the stock’s prospects, with Britam’s business presence continuing to expand.

Says Chambua Ogoti, an investment analyst: “the insurer has invested a lot of money into tower block offices in Upper Hill, and lined up similar real estate projects despite the ongoing battle against Cytonn.”

Few good buys

Mr Ndindi Nyoro, the head of Investax Capital agrees: “Britam is one of the few good buys in the market, with its current price set as a good entry point for investors looking to take position,” he says. “Any investors who’ve bought it already should hold and those looking for medium to long-term investments should buy.”

The counter has traded at a low of Sh16.40 and a high of Sh40 over the past one year. On Friday, Britam opened the day at Sh28 per share.

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