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| Prof Warsame |
CRDB Bank shares are trading at giveaway price below their book value
despite exhibiting handsome returns as a result of good performance. The
scenario has left financial analysts puzzled.
According to the share price valuation made by Dhow Financial, the fair
value of the stock is 260/- a piece, but was last week trading at 127/- a
share, this year’s lowest.
“We carried a number of stimulation measures on the share prices but
the target price was around 260/-,” Dhow Financial Managing Director Prof Mohamed
Warsame said.
The analyst said despite investors shunning CRDB stocks, earnings per share (EPS) stood at 17/30 at
the end of last year while dividends offered rose from two shillings in 2008 to
nine shillings 2011.
“The problem is individual stock investors are driving the market
instead of wholesale investors…small buyers cannot move prices as their demand
is minimum,” Prof Warsame said.
Another problem, according to analysts, dividends are determinants of
share prices on the Dar es Salaam Stock Exchange (DSE) instead of variables
like earning per share, shareholder capital, return on equity or return on
assets.
“Speaking about stock rating for CDRB shares strong buy,” Prof Warsame
said backed by the analysis they carry on the bank share price released on
Tuesday.
CRDB Bank commissioned a study to look at the abnormal performance of
its shares, which has a negative correlation between the bank’s performance and
market price since listing at DSE in 2008.
Stockbrokers say CRDB bank’s low price was from the fact that the
shares were diluted before listing thus creating many stocks and when finding a
ratio, because are denominator, produce a low ratio. “The best way is for CRDB Bank to buy its own
shares to reduce their huge numbers at the bourse, thus creating shortages.
In return the prices will jump up,” Core Securities Chief Executive
Officer Mr George Fumbuka advised.
CRDB Bank Managing Director, Dr Charles Kimei, said buying its own
shares at the bourse was against regulations. Such a move, he added, would in
return create capital constraints.
“Banking is one of the highly regulated practice in the market. We are
not allowed, though we wanted to do it,” Dr Kimei said. “But may be we were
wrong top dilute the shares before listing,” he added.
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| Dr Kimei |
Rasilimali Limited Chief Executive Officer Mr Arphaxad Masambu said
they find it difficult to sometime forecast CRDB bank’s performance as in the
first and second quarter things might be good but turn upside down in the
fourth quarter.
On the other hand, Mr Masambu said “the (local) investors are
speculators and not real ones who want to maximise profit in a short
period.”
Despite CRDB share price being low compared to National Microfinance
Bank (NMB) price of 950/-, Price-Earnings ratio of the former is higher at 7.50
than of the latter at 6.60.
Even within the East African Community CRDB Bank’s EPS and PE are on
the higher side compared with KCB, Equity Bank and Diamond Trust Bank.
On top
of that, CRDB Bank’s PE is above the industry’s average of 7.41 although CRDB
Bank’s share price is far below its peers in the region, which is above 400/-
average a piece.
Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza
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