Sasini shares soar after asset sale, targets Sh288m dividend payout
By Moses Michira | August 17th 2015
Shares of listed tea and coffee grower Sasini rose by more than a tenth last week after the firm announced it had sold two of its estates that were consistently making losses.
Investor appetite for the stock of agricultural company majority owned by business mogul Naushad Merali was sparked by news of a Sh1 dividend a share following the disposal.
“Successful disposal of these assets in the second half yielded considerable contribution to the bottom line,” the firm said. Sasini described the two estates, Wahenya and Mweiga, in Nyeri country as non-performing assets that have been making losses for the last six years.
The asset disposal helped Sasini’s profitability for the financial year ended July, rising tenfold to Sh649 million in net earnings. Low output attributed to poor rainfall had pushed the firm to loss-making territory in the half year.
Higher tea prices in the global market during the year boost its revenues, and was significant in the reported profitability compared to the Sh65 million booked last year. Its shares closed trading at Sh17.85 on Friday, to place the company as most sought after in the agricultural sector.
The firm did, however, not disclose the value of the transaction or buyers of the estates. It is likely that the details of the sale would be disclosed in the company’s annual report since it is crucial for the investors.
Generally, land prices have been on a steady rise since the turn of the millennium and the underlying appreciation in valuation has been central in the pricing of listed agricultural companies. In the most recent cases where land prices have driven the share price of listed firms, Centum acquired over 10,000 acres of land under sisal plantation at the Coast from Rea Vipingo, another listed agricultural firm, in a multi-billion shilling deal.
Limuru Tea is currently the priciest stock at the Nairobi Securities Exchange main board at Sh1,090, in a valuation analysts attribute to its main asset - land.
Limuru Tea, unlike Sasini that has its estates in Nyeri and Kericho counties, is close to Nairobi – the epicenter of the boom in construction. Both firms, however, have been badly exposed to the changes in weather through a biting drought that started in the second half of last year.
Sasini said in its statement that the drought had specifically led to low yields in the tea estates it disposed off, and had actually informed the sale.
Managing director Moses Changwony said in the statement that the firm would pay out Sh288 million as dividend from the cash generated, while most of the funds would be invested in ‘more productive’ projects.
The firm did not, however, reveal what the investment is. The dividend payout next month could continue driving the share price of the grower.
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