Broker advises Kerry Group to split shares as price hits record high
Published 25/02/2010 | 05:00
DUBLIN stockbroker Bloxham has recommended that Kerry Group split its shares since the price of its stock has reached a level that "impairs liquidity".
The recommendation comes as Kerry's shares trade at all-time highs, with a new record of €23.66 briefly hit yesterday in the aftermath of Tuesday's expectation-beating full-year results.
"At a price of over €23 each, the shares are at a level that impairs liquidity," Bloxham analyst Joe Gill said in a note to clients. "Retail investors and sell-side traders alike are less keen to actively trade shares that cost so much, and particularly in a company where liquidity is tight due to its farmer/co-op ownership structure."
Mr Gill went on to recommend a four-to-one share split which would see Kerry's stock trading at about €4.50.
"At that level we think activity levels in the stock could significantly improve, thereby helping the group raise its liquidity and further expand its shareholder base," he added.
A spokesman for Kerry described the note as "interesting", but said Kerry was not actively considering a share split.
"While a high share price may present a psychological issue for retail investors, in reality, we believe this to be a subjective psychological position rather than a financial investment consideration," he added.
Ryanair is the most recent Iseq-quoted company to implement a share split, exchanging two €6.175 shares for every one €12.30 share held by investors in February 2007.
The shares are now trading in the €3.40 to €3.50 range.
"Academic studies indicate that while there may be a short-term bounce following a share split -- the value reverts to the pre-split valuation within a three- to six-month period," Kerry's spokesman stated yesterday.