Monday, September 22, 2008

National Insurance Corporation

Haa finally NIC is bringing on its IPO, it starts in the first week of October 2008, 40% of the Government stake is going to be sold to the Public on the Uganda Securities Exchange. watch the next two weeks from now, HAVE YOU SAVED any money...?
will post the likely impact of NIC IPO on the other stocks.

Friday, September 19, 2008

The Power of Information in this Age or is it the Information Edge

Dear Kasigi,
Indeed information is power, did you read the New Vision Daily’s Editor’s Opinion on Friday 12th September 2008 about Uganda Clays ‘irrational’ buyers, where was the editor when after sacking Pike from NVL the share price appreciated 30/= each trading day from around 430/= to 2700/=???? Star Trader’s understanding of the market is that prices are moved by the forces of Demand and Supply- psychology affects either of the two: demand and supply.
Anyhow back to The Power of Information in this Age: well view the trading board Before and After Editor's Opinion.

Before: Closing deals on 11th September 2008: Uganda Clays Counter
After: Closing deals on the18th September 2008: Uganda Clays Counter

Well Information moves money: no doubt!
New Vision's editor's opinion has no doubt contributed to Market liquidity- Thanks NVL

Monday, September 15, 2008

Another reason why its good to buy an IPO and hold for the Long Term

Uganda Clays IPO
Your Return 0n Your Investment

Original Divestiture Program
Governed by the Public Enterprise Reform and Divestiture (PERD) Statute of 1993, UCL was listed in Class 4 of the Statute (whereby the Government of Uganda (GoU) is required to fully divest its interest in a company). A decision was made in November 1998 by the Divesture and Reform Implementation Committee (DRIC) (as established by the above PERD Statute) that 325,000 shares of the total 375,000 Government held shares were to be sold to the public, the balance of 50,000 was to be sold to the management and staff of UCL. GoU eventually allotted an additional 50,000 shares to the staff. The offer price to the public was UShs 4000 while the discounted price to staff was UShs 3850.

Had you purchased 1 share of Uganda Clays during the IPO offering at 4,000 Shilling that share would be currently worth 250,000 shillings
That one Share has split first by 10 and then again by 100 becoming 1000 shares

If you had purchased the 8 Shares you were entitled to during this year’s Rights Issue Offer
They would have cost you 21,200 Shillings

Those 8 Shares would have also split into 800 Shares

at today’s closing price of 250 per share (11th Sept. 2008) your 1800 Shares would be with 450,000

The Original investment of 4,000 shillings plus the additional 8 shares purchased f 21,200
you would now have 1800 shares wth 450,000 Shillings

Small Investors
1 Share - 450,000
10 Shares - 4,500,000
100 Shares - 45,000,000
1,000 Shares - 450,000,000

NSSF and Large Invests
10,000 Shares 4.5 Billon
100,000 Shares 45 Billion
1 Million Shares - 450 Billion

Current Shareholders
(As at July 31, 2008) As of Sept 1 2008
of 9 Million Shares 900 Million Shares
• National Social Security Fund–NSSF (30.59%) 2,753,100 275,310,000 Shares
• National Insurance Cpation—NIC (18.86%) 1,697,400 169,740,00 Shares
• Barclays Bank of Uganda Nominees (9.5%) 855,000 85,500,000 Shares
• Uganda Communications Employee
Contributy Pension Scheme - UCECPS (5.74%) 516,600 51,660,000 Shares
• Bank of Uganda Retirement Benefits Scheme (2.09%) 188,100 18,810,000 Shares
• 1,165 Other Shareholders (33.22%) (Small Invests) 2,989,800 298,980,000 Shares
*Note Sept 1, 2008 Shareholdings are based on the 1 to 100 Split of July 31, 2008 Shareholdings


Wednesday, September 10, 2008

Of: Kyabazinga, Split and Rights

Dear Kasigi

No doubt the Burial of Kyabazinga temporary halted the Uganda Clays Train, no trading on Monday as it was declared a public holiday to celebrate the life and times gentle giant,

Is it a train? I think so. Are people jumping on the Wagons? I think yes.

Is there going to be a band wagon effect? Why not- only that this train if well managed seems to be long (high growth potential company).

*Uganda Clays Stock has gained a staggering 104.54% in Four trading sessions after split: 110/= at split 225/= yesterday- welcome to the Risky Markets where returns… Related article below

Of Rights and Splits

Yesterday 9th September 2008 was to be very busy on Uganda’s Stock Market: with Baroda bank split shares Trading, New Vision Media House rights trading well Baroda traded 1000 shares closing at 600/= from split price of 556/=. New Vision presented an opposite trend to Baroda as there were outstanding offers; though it traded OK with 1080 shares exchanging hands at an average price of 1,935.18/= closing at 2,000/= (Sam Njuguna and Alex Mugabo watch out for the financials which are soon being released)

Tuesday, September 2, 2008

UCL vis-à-vis Trading Spread and Liquidity after Split

Was thinking about Uganda Clays Limited in the aftermath of its 2nd split on the 1st September 2008- and thought I would share with you guys (USE).

Accessibility & spread
In the recent past a trader ("investor") needed 1,000,000 ugx minimum to buy shares in this highly illiquid UCL stock, after split they shall need 10k (most likely 100k)!
If they come rushing for these shares, how r u gonna work the 30 shs spread?

Bill(also a regular at the mkt) & meself were deliberating on the psychology of UCL individual shareholders in relation to them selling: then at the AGM that year (I think 2006) we did separate observations which included:
-Most shareholders above 40yrs
-Conservative and very cautious in nature: dress, speak….
-majority were professionals at the time of IPO in 2000, who probably could comprehend
issues regarding stock mkts since they were exposed to them in say academics
-these observations were for only the individual shareholders, and they typify investors (buy for very long time unlike traders).

There is lots of small monies 100-800 Ks that is eagerly awaiting for a chance to get a stake of this crown jewel (I think it is the jewel amongst all USE stock). This takes us back to:
If they come rushing for these shares, how r u gonna work the 30 shs spread?

Reasons why they could come rushing:
- UCL has 2 or 3 more major announcements: Acquisition, commissioning at
- Re-branding of Co: new logo, regional outlook, They are re-born so to speak.

Gut feeling: Sooner than latter USE shall succumb to the % spread (like the brokers rightly complained), I mean 30 ugx spread applying to UCL at 11350 per share pre-split and UCL post split at 110 per share …… (?)

Liquidity : My foot
Atleast UCL has proved that there is no rhythm here in Kampala between: share splitting & Liquidity.
I think the best way to bring liquidity to UCL is to get the big boys (NSSF, Pension funds, Parent Cos…) to offload their shares on the market (unimaginable! haa) read Baroda.
Ironically after the split these same big boys shall come in to sweep any supply!*?

Gut feeling: for liquidity the market shall inevitably have to attract as many Speculators as it can- then we can talk of a Liquid Market.
Maybe also pre-IPO splitting so many shares can be on offer (eg if NIC were to offer a share 500ugx each, they could make them 10 instead at 50 ugx) coupled with preference to individual investors (which is the bedrock of speculators are).

WILL post split UCL price OVERTAKE SBU price? Your guess is as good as mine



Company: Safaricom
Country: Kenya
Sector: Telecommunications
Number of subscribers: 9,245,000
Market share: 80%
Shares Offered: 10,000,000,000

Domestic Pool: 6,500,000,000

Breakdown: Retail (me and you) 3,380,000,000
Qualified Investors (Regional NSSFs) 2,730,000,000
Authorised Safaricom Dealers 130,000,000
Employees 260,000,000

Value of share: 5.7 Kshs
IPO price:
5 Kshs
Earning Per Share: 0.362 Kshs
Price Earning Ratio: 13.81
Profits after tax: 12,010,431,000 Kshs
Dividend Payout: 3.33% of profits
Allocation Results: 30th May 2008
Refund date: 9th June 2008
Trading date: 9th June 2008

Currently there are roughly 1,100,000 trading accounts on the East African Stock Exchanges, that's below 2% of the region's population.
Safaricom has been an eagerly awaited stock, even by those who have never traded a listed share let alone partake in an IPO- Initial Public Offer.
WHAT IF 3,000,000 new Trading Accounts join the 1.1m existing accounts: at a minimum application of 2000 shares that would total to 8,200,000,000 shares compared to the 3,383,000,000 allocated to retail investors equalling 142.6% oversubscription.

In simple terms this would translate to 925 (inclusive of the 100 guaranteed incase of an oversubscription) shares on Pro rata or in proportional basis IF the above holds.
In lay terms pro rata is kind of ratio basis of share allocation.
Say, you are offered 1 share for every 5 applied for.

OR WHAT IF all the Safaricom network subscribers (9,245,000) apply for the minimum 2000 shares; and that's for Kenyans alone.

Exchange Rate: Application
Safaricom IPO is aiming to raise over $700m by the 23rd April 2008, but it would not come as a shock if $2b came in. Remember all this money will have to be exchanged to the Kenyan currency before sharing in the IPO.
This shall no doubt result into an ARTIFICIAL gain in the Kenyan shilling on other currencies.
WHAT IF, for the case of Uganda the rate is at Kshs 1 for UShs 28 buying (as some banks are already trading).

Exchange Rate: Refund

With all the excitement that has followed the Safaricom IPO, a refund is inevitable and no ONE
(in the industry) will tell you that at refund, just like at application, there will be an ARTIFICIAL-though this time loss in the Kenyan shilling vis-à-vis other currencies.
WHAT IF, for the case of Uganda the rate at refund is at Kshs 1 for UShs 22 selling (Banks shall use their own rates). Imagine!

Safaricom undoubtedly is massive, bringing to the market 10 billion shares where there existed 15 billions previously on the oldest Stock Exchange in the region.
A typical Star Trader shall by now be observing the impact of this obvious fact on their local Stock Exchange especially in the stock with regional shareholding. For instance, a Stanbic share has lost Shs25 (to 230) this week because many investors are selling off to plunge their funds into Safaricom despite the release of the bank's financial results; most likely this month.

The development though has brought some attraction to the Secondary Markets, with investors selling off part of their share-holdings to go for the "massacre" on the Safaricom IPO.
Good luck to all you investors,

For critiques and to receive the numerical breakdown of this WHAT IF scenario e-mail:

Muhimbise Andrew
+256 752 431064
Star Traders'
Inspiring the next generation of regional traders

The above Report appeared in the Red Pepper, Business Sense magazine, of Wedneaday 9th April 2008.