Mumias Sugar Co., Kenya’s largest miller of the sweetener, rallied the most in more than five months, rebounding after a signal indicating the stock was oversold dropped to the lowest in almost 4 1/2 years.
The stock climbed 7.4 percent to 3.65 shillings by the close in the capital, Nairobi, the largest gain since March 5. Almost 66 percent of the three-month average volume of shares were traded.
Mumias’ 14-day relative-strength index fell to 14.1 yesterday, the lowest since March 2009, according to data compiled by Bloomberg. A level below 30 signals to some technical analysts that the stock is oversold and set for to climb. The RSI rose to 30.4 today. Last month, lawmakers from western Kenya asked President Uhuru Kenyatta to summon directors of company to explain its “poor performance,” according to a July 31 statement from the presidency.
“There was some panic sell-off when there were lots of bearish reports on the stock,” Davis Mika, an analyst at Nairobi-based Contrarian Investing Kenya Ltd., said by phone. “We are likely to see government intervention because of the political ramifications. It’s a company which plays a big part in the economy of western Kenya and a lot of farmers depend on it.”
The company’s share price fell 17 percent in three trading days to yesterday after Nairobi-based Sterling Capital Ltd. more than halved its target price on the stock, cutting it to 4.32 shillings from 9.20 shillings set in July 2012. A message left on the voicemail of Mumias’ Marketing Manager Pamela Lutta wasn’t immediately returned.
“That fall should now be able to attract investors to the company at the low share price,” Maureen Kirigua, a research analyst at Nairobi-based Sterling Capital, said by phone today.
In February, Mumias said earnings for the year through June would be more than 25 percent lower than the previous period. In the first half through December, the company reported a loss of 1.1 billion shillings ($12.6 million) from a profit of 825.2 million shillings. In the meeting with lawmakers, Kenyatta said he “cannot allow the company to collapse under our watch.”
The company has the second-worst performing stock on the Nairobi Securities Exchange’s FTSE NSE 25 Share Index this year, falling 25 percent. The gauge has rallied 30 percent in the period.