Uchumi Supermarkets Rises to Highest Since 2006 on Valuation

Uchumi Supermarkets Ltd. (UCSP), Kenya’s only publicly traded retail chain, climbed to the highest since 2006 on speculation the shares are cheap relative to regional peers even after almost doubling this year.

The stock climbed 2.1 percent higher at 14.90 shillings, the highest since May 2006, by the 3 p.m. close of trading in the capital, Nairobi, according to data compiled by Bloomberg. The benchmark All Share Index fell 0.4 percent.

The retailer has climbed 94 percent this year, the biggest advance among shares in the benchmark gauge, to trade at 10 times reported earnings, according to data compiled by Bloomberg. Massmart Holdings Ltd. (MSM), a South African retailer controlled by Wal-Mart Stores Inc., has a price-to-earnings ratio of 34, and Pick n Pay Stores Ltd., a Cape Town-based supermarket chain, is valued at 32 time profit, the data show.

“There is a sense that the company has turned around and if you compare it with its peers, other supermarkets are trading at much higher multiples,” Aly Khan Satchu, chief executive officer of Nairobi-based investment company Rich Management, said in a phone interview today.

The company’s pretax profit for the six months through December climbed 26 percent to 204.3 million shillings ($2.5 million), Uchumi said in January. Nairobi-based Kestrel Capital (East Africa) Ltd. recommended investors buy the stock in March initiating coverage with a price estimate of 15 shilling, saying the board of directors was likely to deliberate on the company’s dividend policy at the end of the financial year in June.

Uchumi resumed trading in Nairobi in May 2011, following a five-year suspension, after most of its debts were cleared and others were converted into shares, according to data compiled by Bloomberg.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.