Stock market investors have urged Continental Holdings plc (CHL) shareholders to exercise patience and caution as the share price continues to tumble, saying patient investors are poised to benefit in the long-run.
CHL plc share price has dropped by about 44 percent from a peak of K350 per share on the listing day on August 10 to K197.91 per share yesterday, which is K2.91 above the Initial Price Offering (IPO) price of K195.
In separate interviews yesterday, stock market analysts and investors attributed the huge plunge in the share price to speculative investors who wanted to make quick gains, but urged long-term investors not to panic as they are still poised to benefit.
Stock market investor Benedict Nkhoma said a rapid increase from K195 to K350 per share, followed by a decline towards the IPO price indicates that some investors may have been pursuing quick gains in the short-term.
He, however, observed that although the situation has the potential to erode confidence of investors who bought the stock at K350, it does not affect CHL plc’s overall performance and long-term investors should remain optimistic.
“The price correction does not necessarily mean that CHL’s underlying businesses have suddenly deteriorated. It is primarily a market valuation adjustment,” said Nkhoma.
He said the price range of between K195 and K200 is critical because it is close to the IPO price, emphasising that the share price could begin to stabilise around this level although further volatility is possible as early investors reposition themselves.
Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa attributed the soaring share price a few days after listing to excitement, adding that the current trend reflects price discovery.
He said: “The likely impact is that short-term investors who bought at the peak may have incurred losses while some speculative pressure on the stock may have eased.
“With the share price now much closer to the IPO price, future price movements are likely to depend more on CHL’s financial performance, earnings growth and overall business prospects.”
Makwakwa said they expect some volatility in short-term as early investors decide whether to hold, sell or accumulate the shares while focusing more on CHL’s performance and long-term business strategy.
Investment analyst Brian Kampanje said the share price plunge was anticipated as there was 93 percent subscription rate, but added that the steepness indicates panic sale by some investors.
He advised first time investors to remain patient with their equity as the stock market is an avenue for long-term investors.
Said Kampanje: “The message for bonafide investors looking for long-term growth is that the world is not ending tomorrow.
“The market share price for the CHL will rise in the future..”
Kampanje urged authorities to investigate the motive of those who may try to sell the share at a loss.
Minority Shareholders Association of Listed Companies Central Region chairperson Purity Chitalo has warned investors against making decisions out of fear or speculation.
“If the company’s fundamentals remain strong, those who hold with a long-term investment plan are more likely to benefit than those chasing short-term profits,” he said.
CHL plc IPO saw 701.8 million shares bought at K135.4 billion, representing 93 percent subscription rate.
In CHL, the public has 23.29 percent equity out of the 25 percent offered while majority shareholder Trans Africa Holdings reduced its stake from 61 percent to 34.35 percent with Press Trust increasing its holding from 14.4 percent to 17.8 percent.
The Employees Share Ownership Programme was allotted 9.98 percent and other minority shareholders pre-IPO hold 14.58 percent with the unsubscribed 51.4 million shares valued at K10 billion allotted to underwriters.
