Home Afrika Ltd., the only real-estate developer listed on Kenya’s bourse, declined for a fourth day on speculation that its initial public offering price was valued too high relative to the market’s all-share index.
The company’s shares, which ended the first day of trading on July 15 at 25 shillings, plunged 8.4 percent to 19 shillings by the close today in the capital, Nairobi. About 15,200 shares were traded, or 68 percent of the average daily volume in the eight trading days since listing, according to Bloomberg calculations.
“Home Afrika is currently overvalued,” Davis Mika, an analyst at Nairobi-based Contrarian Investing Kenya Ltd., said in an e-mailed note to clients. The company trades at a price-to-earnings ratio of 54.8, he said. That compares the main index’s 14.3. The stock’s “fair value” is 12.4 shillings, Mika said.
Home Afrika’s sales in the 12 months to December may rise 19 percent to 1 billion shillings ($11 million) because of sales of plots and houses, while net income may increase as much as 25 percent to 210 million shillings amid lower finance costs, he said.
The listing “was not an avenue to raise money but for the existing shareholders to discover the value of the company,” Home Afrika Chief Executive Officer Gerald Chege said in a phone interview. “Revenue in real estate is only recognized after a transaction has been completed.”