“Some excitement and some investor demand was expected and we saw that from the appreciation on its price. At 25 shillings, its price-to-earnings ratio is around 61, which is quite high compared to the market price-to- earnings ratio of 14, so this doesn’t seem sustainable,” Kestrel Capital research analyst Ian Gachichio told CNBC Africa on Tuesday.
Gachichio however expects Home Afrika’s P/E ratio to correct itself towards its reference price of 12 shillings in the near future.
Home Afrika listed at 12 shillings and closed at 25 shillings, a 108 per cent rise. The company also plans to raise their project turnover to 10 billion dollars in the next five years.
Home Afrika’s entry into the market will be particularly beneficial for Kenya’s construction centre alongside strong performing companies such as Athi River Mining (ARM), Bamburi Cement Limited and East African Portland Cement Company (EAPCC).
“A deficit of infrastructure in the East African region is what’s going to drive the performance of the likes of ARM and Bamburi, so Home Afrika perhaps would be a small player to contribute to cement demand volumes. Kenya’s cement industry in the East African community, basically the next five to 10 years we can expect it to do very well,” Gachichio explained.
Kenya’s investment company Centum Investments Limited plans to enter the country’s real estate market and is currently seeking partners to help develop their 100 acre real estate project in Runda.
“Traditionally, property in Kenya has provided very solid, stable returns with less volatility than the financial markets so I think that’s probably what’s driving a lot of these companies to go into real estate,” he said.