Uchumi of Kenya Falls 3rd Day on Valuation Bets: Nairobi Mover

Uchumi Supermarkets Ltd., Kenya’s only publicly traded retailer, fell for a third day and was trading at its lowest level in more than two weeks on speculation the stock is over-valued following a rally.

The stock dropped 9.9 percent to 15.50 shillings by 12:28 in Nairobi, the capital, bringing its decline over the past three trading days to 20 percent. A close at that level would be the weakest since May 11, according to data compiled by Bloomberg.

Uchumi’s 14-day relative strength index closed at 93.3 on May 23, according to data compiled by Bloomberg, capping a 10-day rally. A reading above 70 suggests a security is overvalued. The stock is the best performer in Kenya’s All-Share Index this year, having more than doubled.

“Investors are taking profit after the rally, it shot up quite high and it could only keep up with that trend for so long,” Joy Migongo, a research analyst at Nairobi-based Kestrel Capital East Africa Ltd. 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 ($2.39 million), Uchumi said in January. Kestrel Capital recommended in March investors buy the stock, 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.

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