Upside potential in Agra shares
Agra trades its shares through the so-called Over the Counter market, administered by the Namibian Stock Exchange, but companies trading on this platform are not listed entities. Agra is currently the only Namibian company employing the Over the Counter (OTC) trading facility.
Under the new Regulation 29 of the Pension Fund Act, institutional investors are required to invest 3.5% of total assets in Namibia earmarked for investment in unlisted entities. This is in addition to the 35% local asset requirement of Regulation 28 which has been in force since shortly after Independence in 1990.
Speaking to the Economist this week, Agra CEO Peter Kazmaier said he expects Agra’s share price to increase once more institutional investors are analyzing the market for possible investment opportunities through approved Special Purpose Vehicles. So-called SPVs are required by Regulation 29 as investment shell for the additional investments in unlisted companies. These SPVs have to be approved by the Namibia Financial Industry Supervisory Authority, Namfisa.
However, Kazmaier said that the company needs to continue to show consistent growth in revenue and earnings to attract institutional investors.
Agra is counting on generating positive cash flows from 2016 onwards to service the high capital outlay of the new Agra Hyper development in the Lafrenz Industrial Park in Windhoek as well as the major refurbishment of the Auas Valley Shopping Mall .
At the time of Agra’s conversion in 2013 from an agricultural cooperative to a public company, the OTC market was seen as an ideal platform for price discovery. In the first deals, 200,000 shares changed hands at N$1.70 per share. After these initial testing of the water, the share price gradually receded. For 2013, some 8,281,997 shares were traded at a total value of N$6,572 137 at an average share price of N$1.26.
In 2014, the second year of trading, only 2,896,514 shares were traded at a total value of N$2,590,225 but the average share price decreased further to N$1.12.
This year, from around April onwards, the share price has shown some recovery. For the deals in the first semester, the share price averaged N$1.27, appreciating to N$1.40 in the latest deal on 08 August where 13,263 shares sold for N$18,568. Total trades for this year now stand at 1,949,258 shares for a combined value of N$2,483,872.
Agra issued close to 110 million shares at a Nominal Value of N$1.00 to former co-op members as part of the conversion in 2013. Kazmaier said most Shareholders have decided not to trade their shares, as in total only 10% of the issued shares were trade in the three-year period ending 31 July 2015.
“Some smaller shareholders might have decided to sell their shares due to cash flow problems experienced as a result of the drought, and some might still sell when the price reaches N$ 1.50 per share” he said adding that Agra incorporated a clause in its statutes which limits voting power of any one shareholder to 5%. “This means that even where a shareholder holds more than 5% of the total shares his voting rights are limited to 5%” Kazmaier explained.
Agra has an estimated 4,300 shareholders and approximately 19 % of total shares were on conversion held by previously disadvantaged persons
With 120 million shares in issue valued at the going average price of N$1.27, the company’s capital base exceeds N$152 million. At the target price of N$1.50 per share, this will grow to N$180 million.
But Kazmaier warned that the new investment in Agra Hyper and the Auas Valley Shopping Mall is substantial and that shareholders must not expect a dividend before 2017. Agra’s financial year runs from August to July.
Kazmaier is very positive about Agra’s future and about growth prospects, saying that their customers will choose to use Agra as their one-stop retailer with everything the farmer needs under one roof.
Agra has also recently completed building a new branch next to the existing one in Opuwo and will open their next Branch in Rundu early in the new year.
Agra currently operates 19 branches countrywide, with the Karibib and Maltahöhe branches earmarked for refurbishment during the current financial year.