ELEVEN BILLION NEW YEAR GIFT; Welcome back Home NSSF.

Today the 27th December 2010, Uganda Securities Exchange Equity section moved 40,000,000 Stanbic Bank Limited shares at the highest ever price of 275/= each therefore the Stanbic counter recorded record 11 billion Uganda shillings worth transfer of Shares, facilitated by the African Alliance Brokerage house on both the Sale and Buy sides, earning an estimated 300million UgX in such a tough year for the Brokerage houses which saw MBEA the oldest firm holding 50% market share at the time- suspended.

This by far accounts for the highest turnover in a single trading day even dwarfing annual turnover from the early 2000's, the highest turnover earlier was facilitated by MBEA Brokerage house (wonder why they are not yet back) at around 4 billion Uganda shillings.

Star Traders' Take: Temangalo Ghosts finally Rest.
This is certainly out of the ordinary and when Star Traders' thought deeper, it could be that:
The NSSF,the single biggest investor in the market, is back! (What a time to return in between the two biggest calendar holidays) in the Equities market of the Uganda Securities after a very long sabbatical of more than 2 years, yes TWO YEARS.

Why NSSF, well African Alliance in 2010 won the Tender to provide brokerage services to the NSSF , Click.

Non-Uganda Readers:
1$ = 2300 UgX



On Top of this Happy and Prosperous New Year from Star Tradrers' - Think Shares.

BRALIRWA, LETS LEAVE IT FOR THE RWANDESE

Loyal Readers' of this blog have insisted that i write about the Bralirwa IPO; i opine we leave this IPO for the Rwandese it is there first and if we participate we shall water down their (citizens)benefits and curtail growth of he Market, Imagine if the Kenyans participated in the Uganda Clays IPO- certainly the Stock Market, with the benefit of hindsight, would not have gotten the few Loyal retail investors.

Rwanda the Market
There is one Company in Rwanda called Capital Ventures, i have heard that it is more wealthy than Rwanda the Country, made its wealth in Bio-tech.... sincerely this guy will want in the Equity market.

Bralirwa
These fellows are paying out almost all profits as dividends; is the growth potential nil?

Conclusion: DO NOT BUY, LEAVE IT FOR RWANDA;
Star Traders'

Below is an e-mal from one of the leading Brokerage Houses in Kampala Uganda handling the transaction read carefully and make your choice.


Time is running out for investors in Uganda who wish to participate in
Rwanda’s first Initial Public Offer (IPO). The official closing date for
Bralirwa IPO is Friday, 17th December 2011.

HOWEVER, due to the extra time required to send documentation and funds to
Rwanda, Crested Stocks is imposing a deadline of Tuesday, 14th December for
receipt of all application forms and deposit of funds.

How to Apply for Shares in Bralirwa:

1. Deposit Uganda shillings into our Stanbic Bank client account. Bring
the deposit slip to our office. We shall advise you of the equivalent
exchange rate between Uganda Shillings and Rwanda Francs at the time/day
of your deposit. We are following the daily bank rate offered by KCB.
Bank Name: Stanbic Bank


2. Visit Crested Stocks office to fill in the application forms. We are
open Mon – Fri from 8:30am to 6:00pm and Saturday from 9:00am to 1:00pm.
Requirements: 4 color passport photos, 2 copies of either a passport or voters card.
IMPORTANT NOTE: only passports or voters cards shall be accepted.

Note that cross-border investments carry an additional risk of foreign
exchange fluctuation. This can be particularly risky for investors in the
case of oversubscriptions and client refunds. Investors are strongly
encouraged to speak with an investment advisor at Crested Stocks about
these risks.

If you have any questions, or are outside of Uganda and cannot visit our
offices please contact the following members of the CSS team:

Joseph Kibuuka +256 782 474929 or jkibuuka@crestedsecurities.com
Ruth Nabakka +256 712539471 or rnabakka@crestedsecurities.com
Robert Baldwin +256 77 4046913 or robert@crestedsecurities.com

Thank you for choosing Crested Stocks and Securities as your broker, I
remain,

Yours Sincerely,


Robert H. Baldwin

Stock Market Briefs Kampala

Risky Stock Market
The Parliament of Uganda recently passed laws for the Members' Pension Fund that will bar investments in the Stock Market and generally shares reason being they are risky ventures and present more of a Gamble.

NIC Dividend payment
At the recently Concluded NIC AGM the dividend for year end DEcember 2009 was to be paid on the 11th October 2010 however due to technical and scheduling difficulties it may happen 3 weeks after.
Notice: If shareholders' have not received theirs by the 2nd November 2010 call: +256 414 346122.

MBEA
Andrew Owing an accomplished Investments professional authoritatively promised that his company MBEA would be back on the Market in 3 months. It is 4 months and we are still counting.
WHAT EXACTLY WENT WRONG WITH THE OLDEST AND PIONEER BROKERAGE COMPANY IN UGANDA THAT COMMANDED AROUND 31 BILLION SHILLINGS FROM TRANSACTION ADVISORY OVER A 12 YEAR PERIOD?

British American Tobacco Uganda (BATU) Share Price Doubles

BATU's share price moved 112 percentage points from 330/= to 700/= today 30th September 2010 on the Uganda Stock Market after more than a year below 350/=.
Though with a paltry 500 shares exchanging ownership worth 350,000/=, this is very significant considering a pending half year dividend of 70/= per share and accumulation of suffocated value through disposal and productivity Leaf production improvements coupled with the exchange movements.

BATU rebirth – LEAF BUSINESS
In the last two years BATU Ltd has been edging more towards the agriculture side of their business and at the helm of this is Mr Fronseca the Brazilian Managing Director, who has gone ahead to dispose off all reminders of the Manufacturing days (BATU closed its manufacturing business Unit due to the an unfavorable manufacturing environment characterized by power shortage and smuggling) and concentrated on the Leaf Business Productivity, with the weakening of the dollar in the over the last two years from 1$=1,800Ugx to 1$=2250Ugx BATU as an export company has reaped also notably proceeds from disposal of manufacturing property.
The Share price was held between the ‘I do not want to Sell now at this price’ and the ‘I want to buy now at this price’.

Near Future
At 700/= and with an upcoming 10% half year price dividend of 70/= this could provide incentive to realize gain on shares bought at 300/= a couple of years from the NSSF. (NSSF sold off her BATU holdings at 300/= under very suspicious circumstances; no prizes for guessing who the Buyer was as well who the MD at the time was! Read NSSF Bond/TBs Dealings)

Brief historic facts:
BATU’s IPO price was 1000/= in the year 2000 it hit a high of 1,700/= around 2008 and a low of 290/= in 2009

WATCH YOUR NIC DIVIDEND OR ELSE...

If NIC pays out 5/= per share as per her declarations, Investors stand to lose 4.5% (total figure:94,230,000/=) of their dividend earning for the financial year end 2009, which would otherwise cover half of the required dividend withholding tax.

WHY NIC?
As the NIC Vs Makerere dons scandal rages on, on issues pertaining valuations of the DAP fund, here is a related 'valuation' issue
from a shareholder's standpoint.
I hope the Capital Markets Authority, will come in to Value incase!


What is the Dividend 'Valuation' Genesis?
NIC in her end of year 2009 published financial statement (New Vision, June 25th 2010, page 20) declare a Dividend Per Share of 5.23/=. It is prudent to note that this publication is a requirement by the Insurance Industry Regulator; therefore unsophisticated Shareholders' were not able to fully comprehend them.

Later on, in August, the NIC released Investor financial statements, a requirement of the Stock Exchange, in the print media declaring 5/= Dividend Per Share as well as announcing the AGM Date of 10th September 2010.

Is the NIC being logically Honest?


THE LOGIC OF DIVIDENDS.
Dividends per share are the earning entitlement paid on each share as a portion of company profits, therefore:

Dividend Per share (DPS) = Total Dividend payable DIVIDED by the number or Shares,

NIC DPS = 2,113,630,000/403,880,000
Therefore, NIC DPS = 5.23/=


Important Notes:

- Witholding tax on Dividend is; 10% for Individual Nationals and Residents and 15% for Companies and Non-Residents.

- NIC has a Share Capital of 2,019,400,000/= which is 403,880,000 shares of 5/= each. There were no extra share issues and this is business exclusive to the AGM.

- Explanations of rounding off could arise (from 5.23 to 5...), however the precedent at the Stock Market is to declare also those points as evidenced from the other listed company dividend declarations.

INVESTOR BE AWARE. Learn from the lessons of Makerere.

UGANDA STOCK MARKET GETS NEW CEO

KITAMIRIKE JOSEPH is the new Chief Executive Officer at Uganda's only Stock Market, he comes in from the National Housing Company of Uganda (NHCCU), He has sat the Uganda Clays Board for a longtime as well.
On the other note the man to Steer the Board is GODFREY TUMUSIIME. This ends the process of USE sourcing for Top Management which started in June 2010.

NIC Uganda to pay 10% Dividend

NIC is going to payout a dividend of 5.2/= per share for the period ending December 2010. NIC is paying out 2,113,630,000 Ugx for year end December 2009 compared to the previous year end at 1,225,094,000 Ugx a 72% increase in dividend payout.

A share cost investors 45/= at the recently held IPO in the first quarter of this year 2010, that translates into a 10% dividend payout to investors after taxes (10% withholding tax.
NIC’s price at the Stock Market has been static between 60/= and 63/= per share ever since it was listed on the 25th March 2010.

STANBIC UGANDA: THE BIG BLUE IS NOT MOVING FORWARD.

Pix: Opiai rock commonly known as Moru Apesur (Rock of Girls) as seen from Soroti town, Muhimbise,April 2010.



In her efforts to pursue technology reforms,the Uganda Securities Exchange is increasingly finding herself between a rock and a hard place in this crucial time of their top executive succession from the founding CEO concluding in June 2010.



Stanbic Bank’s counter has not traded a single share on the Uganda Stock Market since the immobilsation exercise of its shares took effect on the 3rd May 2010, ironically bringing to a standstill trade in by far the most liquid counter on Uganda’s only Stock Market, and accounting for more than 60% trade on any given trading day. This Immobilisation exercise is being supervised by the Uganda Securities Exchange.

THE GENESIS
USE advertised an ultimatum in the mass media (below), in a clear show of frustration at the snail pace of investor reception akin to civil disobedience of the share immobilisation exercise, on the Stanbic Bank Uganda Limited shares.

USE Ultimatum
"All Shareholders with Stanbic Bank Uganda are notified that immobilisation date is 29th, April, 2010 and that with effect from 3rd May 2010 no person shall trade on the Uganda Securities Exchange in the said shares unless such a person shall have successfully opened an account with the Securities Central Depository (SCD) and deposited such shares in such accounts".
Source: http://www.use.or.ug/inner.php?cat=news&sid=335


WHAT IS IMMOBILIZATION ANYWAY?
Is ongoing exercise where share ownership on Uganda’s Stock Market is being moved from paper form to electronic form to necessitate Technology reforms on the Stock Exchange, It is being supervised and implemented by the Uganda Securities Exchange and SCD Agents respectively.

IS IT AFFECTING ME?
To trade in Stanbic shares; a buyer must have an SCD account and a seller must have opened an SCD account as well and handed in their certificate to be converted from paper to electronic record form, short of this you cannot either buy or sell shares on the Stanbic Bank counter.
Five days ago a colleague from Fidelity mailed me asking and I quote; “What happened to the SBU shares? After immobilisation how come it’s stopped trading?” Initially I shrugged it off as one of those common cycles, alas I was so wrong and inattentive; apologies to the other Star Traders’.
When you piece together some events, notably the 240/= trade that rested Stanbic’s price at 226/= for the day (20th April 2010) moving 1,820,518 shares just days before the ultimatum deadline.


STAR TRADERS’ ANALYSIS OF IMMOBILISATION EXERCISE


CHALLEGES IN IMMOBILISATION OF STANBIC SHARES
You can say it is early days- only five trading days after immobilisation with zero shares traded in the affected stock, but this could be tough for the Stock Exchange as long as they are not willing to change their approach of getting investors to immobilize and this is why;


INVESTOR BUY-IN
Investors have not fully comprehended this ‘thing’ as its understanding is covered in a lot of jargon and financial world speak; SCD,CDS, immobilization and alike.
The USE not so long ago had an excellent and practical plan called the; BOURSE GAME, which would enable learning and appreciation of these technology reforms in a practical manner, what happened? A lack of money to implement is a lame excuse, may be a lack initiative.


KENYAN and Sophisticated Ugandan RETAIL INVESTORS
At Stanbic’s IPO over half of the 30,000 investors that took part were from Kenyan, though many have sold out they are still a block of investors to reckon with especially in immobilizing Stanbic Bank’s shares.
Some of the investors like Star Traders’ are not convinced of the Independence of this SCD system yet; how can the Uganda Securities Exchange manage this system surely there is major Conflict of Interest- on the outside they could have good intentions but on the inside they may not be I position to crack the whip, incase of market misbehavior, on one of their own for purposes of market integrity
These are a more battle hardened investor from their NSE dealings, and their reluctance could be to avoid a of de ja vu; as regards past experience with their brokers freely trading with their ‘Electronically’ held shares, this Kenyan sentiment is reflected in this paragraph adopted from a yet to be published Star Traders’ article titled: IS THE UGANDA RUSHING INTO TECHNOLOGY REFORMS

“USE vis a vis SCD
Conflict Of Interest occurs when an organisation is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other; the USE is the market platform, the USE is in lay terms ‘owned or to an extent controlled’ by the brokers and the USE is going to manage the SCD system in-house on which system the same brokers will operate; the brokers are not some kind of saints whom the opportunity to acts ‘undetected’ greed does not appeal to; NSSF Uganda can testify.

This kind of self policing is convenient in the short-term but shortsighted in the long-term
Like say, if there is wrong doing, it may be intent of USE in short-term, like happened at NSE, to eliminate the appearance of unethical behaviour rather than the behaviour itself by keeping any unethical breaches hidden, instead of exposing and correcting them what you may call Keeping intact the Market Integrity.
What if brokers tinker with shares on the SCD account can we trust them to take appropriate action?”


PAST EXPERIENCE
Past experience dealing with immobilized shares, traditionally Ugandan investors have been used to owning and trading physical certificates and their first encounter with owning Electronic shares is like a dark cloud hanging over this Financial industry, it is called SAFARICOM we believe there is no need for further elaboration here. Any way this brings in the fact that you are dealing with cautious investors





WAY FORWARD
IMMOBILISING: PRACTICAL SUGGESTIONS ON HOW TO DO IT.
Borrowing Stanbic Bank’s new slogan, WE NEED TO MOVE FORWARD and Star Traders’ panel has compiled what can practically be done especially to the more complex and numerically superior class of investors: RETAIL investors.


SOFT POWER OF PURSUADING
Tone down on threats, this ultimatum was interpreted by one of our readers as
“As though they are giving Investors’ Amnesty” (read: LRA vis a vis Amnesty) all the benefits mentioned accrue to the brokers and the USE, no effort is taken to explain to investors what good these Orders bring to them; hence providing zero incentive other than being barred from trade in Stanbic shares.
USE could instead adopt the soft power of persuasion, which is the ability to attract without the use of force or payment, Uganda Clays Ltd has successfully done it twice when it recalled certificates to incorporate splits even Baroda has done it; certainly there is a precedent.
Task: identify benefits and communicate them in convincing and more cordial way.


KENYAN
Kenyan investors, Dyer & Blair and African Alliance hold the key that may unlock this hurdle. But they have to be assured there will be no repeat of NSE money circus, considering now that they are even further.
Task: go get the key from D&B and AA.


ALL INCLUSIVE APPROACH
We cannot tell USE’s exact approach to this exercise but from the outside it seems they are going Solo-this is suicidal, why? Honestly from talking to a number of retail investors we realized that they listen more to their listed Company officials than the USE (market) and CMA (regulator) combined, therefore Mr Wafula, Mr Kisaame or Mr Odera could do a better job immobilising than the issued ultimatums.
Star Traders’ recommends USE visibly involves; the listed Companies (UCL, BATU, BOBU, DFCU, NVL, SBU, NIC), the Brokers (who have the most to lose, judging from the ongoing over bidding post Stanbic immobilisation) and the regulator (CMA); issues of ego and small fights should be cast aside for this to work, no investor will hold on to their certificate if all these were to be visible in the exercise.
Task: concerted effort with the CEOs of listed companies urging their respective shareholders to immobilize.


SILVER LINING
Every dark cloud has a silver lining; in this case the artificially created dark cloud over Stanbic Bank counter which has traded no single share Five trading days post-immobilisation compared to 5,675,963 shares traded five days pre-immobilisation.
The silver lining is manifested in the form of pushing attention to the other Banking counters especially Bank Of Baroda Uganda whose price has appreciated from 290 to 450 in the same period.
I believe Uganda Securities Exchange will embark on some of these recommendations, All the best.




To get a copy of: THE FACTS OF THE FIGURES,
email: eatrader@gmail.com
Star Traders' has compiled trading figures of all Ugandan listed banking Institutions namely; Stanbic, DFCU and Baroda spread over; covering 5 trading days before and after Immobilisation of trade in Stanbic Bank shares to assess any impact.

THINK SHARES

USE LEADERSHIP- IS RUTEGA LEAVING

The pioneer CEO of Uganda's only Stock Market may be leaving any time soon, after steering it since 1998, with seven primary listing i must say he has done a good job.
This is excellent news considering the Ugandan culture of staying in power, excellent for continuity; i like to say he was the Privatisation CEO- companies were listed due to this policy under his tenure.

NIC disappoints on day two of Trading

NIC's turnover on day two of trading dipped; from 1,002,540,000 Ugx on day one to a miserable 269,892 Ugx on day two. A massive difference of 1,002,270,108 a clear sign of market manipulation.

The NIC counter moved 4,410 shares at 60 Ugx maintaining its IPO day one price, the day trade was between African Alliance-buying and Dyer and Blair-selling.
Outstanding bids were 139,840 shares at a bid prices between 50-55 Ugx whereas outstanding offers totaled to 3,461,590 shares at an offer price between 60-70 Ugx.

Sudhir
Notably day one's market marker Crane Financials was missing in action a clear indication that day one had everything to do with Mr Sudhir Ruparelia legally manipulating the market.
Ofcourse the guys at the Exchange will tell you, "this is how markets behave"- But Star Traders' does not buy such reasoning- infact Star Traders' is launching an investigation in this circus from:
-Whether the allocation results were really genuine?
Otherwise how can you explain such a movement

NIC share appreciates by 33% on day One

NIC shares jumped from their IPO price of 45 Ugx to 60 Ugx on day one, With 16,709,000 shares exchanging hands accounting for 1,002,540,000 Ugx in turnover which is almost 14% of the Total value of the IPO at 7,269,840,000 Ugx certainly this is commendable Turnover.Below is a picture of actual trade on the USE board.



NIC Counter at the Uganda Securities Exchange trading board 25.03.2010
(Muhimbise A.)

Press Conference;
Usual formalities, with the Lead Broker MBEA passing on the blame for delay in certificates to the Agents distribution capability, Star Traders' confronted MBEA on this.
It is absurd but Star Traders' fought tooth and nail to ensure that there was no Market supply 'monopoly'.
The real reason for delay is that a signatory for certificates from the NIC was not available, could it have been delibarate??- Star Traders' does not believe in this simplistic reasoning.

Food for thought.
Crane Financial Services who accounted for 99.8% of all trade with a bigger portion of shares being traded between Crane and Crane, it brought back some memories of the battle during the initial Privatisation of 60% of NIC, where the Nigerians were on one side and Mr Sudhir Ruparelia the proprietor of Crane Financial Services on the other, you can say the man has got his chance now!

STANBIC BANK- END OF 2009 FINANCIAL RESULTS.

Akin to its newest slogan-Moving Forward, Stanbic Bank has declared a dividend of 13.08 for year end 2009 compared to 5.86 for year end 2008.
In a show of resilience its profit after tax edged up by 21% from 78,550 million UgX in 2008 to 95,298 million UgX in 2009.

Market Impact
At the Stock Market the share price moved from 178 ugx in the previous trading session on 22.03.2010 to 200 ugx today 23.03.2010 with shares worth 6,000,000 ugx exchanging hands, this jump is a clear indication of the confusion in the investment fraternity as regards dividends- as explained below.
Star Traders' is expecting more sober impact in the weeks to come, thursday 25 will be overshadowed by NIC primary listing.

Dividend
Investors note that Stanbic paid out a half year (June 2009) dividend 5.27 ugx gross-this is the first time a company has paid out a periodic dividend in less than 12 months at the Stock Market in Uganda therefore for the second half the actual dividend proposed is 7.81 ugx gross therefore bringing the total gross dividend for the financial yera 2009 to 13.08 ugx gross (withholding tax on dividend is 10% for Listed companies).

Star Traders' feels Stanbic has thrown caution to the wind as regards the financial meltdown that led them to declare a cautious dividend less than 30% earnings per share in 2008 compared to the over 70% dividend payout at the end of 2009.

NIC Certificates; Will the Small Investors' Trade on 1st Day?

The NIC IPO seems to move hand-in-hand with controversy or incompetence as ably demonstrated from the constant delays (most likely deliberate) from both NIC and the Lead Broker MBEA.

Just follow this sequence of events;

Allocation announcement
As per the Prospectus Allocation Results were to be released on 9th March 2010, these were released a few minutes to the close of business on the 9th March 2010 which tranlstes to the 10th of March 2010 and only the State owned media house (NIC holds a sizeable amount of shares in the New Vision Limited) New Vision run this story, WHY?

Refund and Certificate date
The prospectus clearly states Refund and Certificate Collection date as the 18th March 2010, well by close of business on the 19th March 2010 there was no word on the certificates being available at any of the participating brokers or other agents and no official announcement from MBEA for that matter.
WHY?

Was/Is MBEA up to task?
Ofcourse MBEA has smoothly underatken previous IPOs, which raises questions on this NIC!
NIC the company and MBEA ought to be put on spot for their incapability to issue less than 2,500 certificates in a period between 5th February 2010 to the 19th February 2010 that is 40 calendar days, far less in comparison to Uganda's biggest IPO Stanbic Bank which issued over 20,000 certificates in a lesser time period yet with 10 times more certificates issued;
unless there are 'issues'which we shall obviously get to know (The Independent’s Patrick Kagenda in one of his articles hinted on a lead that ought to be uncovered)
NIC and MBEA we are watching your every step, this will not be acceptable to Star Traders’ and all the other smaller investors especially due to your incompetence or ‘shrewdness’, otherwise we propose a suitable trading date be set in regard to the above circumstances.

Monopolistic tendencies
With the benefit of hindsight, this brings to light the exact tactics that were used by Dyer and Blair Kampala brokerage firm during the New Vision Limited’s rights’ issue, which only sophiscated investors realised and that was after it had already happened. Such shall nolonger go on unchallenged!


The catch is here.
On Uganda’s Stock market to sell shares; you present your physical certificate to your broker, who delivers it to the registrar (Deloitte) to verify its authenticity this takes around 3 working days, then your broker can sell.
Fellow Investors if you get your certificate on Monday the 22nd March 2010 you are most likely to miss out on the 1st day trading window slated for the 25th March 2010.
If all stays constant; Guess who will be able to sell, Your guess is as good as Mine.

eatrader@gmail.com

NIC Uganda IPO Share Allocation Results

NIC IPO is over subscribed by 31.97%.

Individuals applications for up to 2,000,000 shares to be allotted 100% of shares applied for that is 90,000,000 Uganda shillings worth of shares.

Institution applications for up to 808,000 shares to be allotted 100% of shares applied for that is 36,360,000 Uganda shillings.


Application details
2,415 total applications were received, 2,289 were from individuals and 57 from
corporations /institutions.
Allocation results have been released by the Privatization Unit
(PU) and priority has been given to individual investors.

Certificates to be ready for collection from your broker/dealer after 18th-03-2010.


Trading in NIC shares on the Uganda Securities Exchange will commence on the 25th March 2010.

Securities Central Depository System

The Securities Central Depository (SCD) system was launched at the Uganda's Securities Market on Thursday 18th February 2010.
Star Traders' is compiling an article on this tittled:
IS THE UGANDA RUSHING INTO TECHNOLOGY REFORMS

NIGERIAN INSURANCE CORPORATION IPO IN UGANDA

9:15 am Entebbe, the aftermath of the Annular Eclipse of the sun, will NIC replicate this brighteness on Uganda's only Stock Market?

Offer Essentials
Company: National Insurance Corporation (NIC)
Country: Uganda
Sector: Insurance
Management Company: Corporate Holdings Limited
Ownership Structure: IGI through Corporate Holdings Ltd 60%
(Includes 9% owned by Local Investors)
Government of Uganda 40%
(All on offer for IPO)

Market share: 11% (Number 4 market player as of 2007)

Shares Offered: 161,552,000
Breakdown of Offer:
Employees: 16,155,200
General Public: 145,396,800
IPO price: 45 Ushs
IPO value: 7,269,840,000 Ushs


Earning Per Share: 5.3 Ushs (2008), 7.5 Ushs (as at 30/09/2009)
Price Earning Ratio: 8.5 (2008), 6 (as at 30/09/2009)

Opening of Offer: 31st December 2009
Closing of Offer: 5th February 2010
Allocation Results: 9th March 2010
Refund date and Certificate Issue: 18th March 2010
Trading date: 25th March 2010

The long awaited NIC IPO has finally come, along with it some controversy; below Star Traders’ analyses the; Prospectus, raging controversy, suspicion, financials and some likely outcomes


Makerere University Retirement Scheme
The Teaching staff at Uganda’s premier tertiary Institution in 1996 contracted NIC to manage their retirement funds under the, now famous, Deposit Administration Plan (DAP). There is no coincidence that when IGI Plc through Corporate Holdings Ltd took over 60% ownership from the then fully state owned Insurance Corporation in 2005 that Makerere ceased to meet its deposit obligations as regards this retirement scheme.
There is an instrument binding this transaction called the GMP and the Trust Deed and Rules which provides that a valuation could be taken by an Actuary.
NIC is in the business of covering risk, it would be therefore foolish to think they have not covered themselves adequately against any adverse scenario like is the case with Makerere’s planned abrupt withdrawal of their Retirement Scheme Funds. For now they are taking punches without retaliation from the Professors in a typical ‘don’t roll with the pig in the mud- you get dirty while it enjoys’ style but I could bet that the Ivory Tower is either not disclosing all or is ignorant about the workings of this DAP scheme, eloquence alone is not enough.
Certainly NIC will be hurt by the subsequent liquidation of assets held in order to meet this abrupt DAP obligation.
Star Traders’ believes this is a Lose-Lose situation for both NIC and Makerere,
They say silence is gold and NIC has benefited from this to mitigate on its perception loss.

Nigeria
It is interesting to note that as one of the risks related to market perception of NIC in the prospectus reads “NIC faces risk associated with IGI’s shareholding in NIC being a Nigerian Company”
East Africans (target retail investors) love Nigerian movies and what is captured under that risk does not add up in the minds of retail investors, It instead highlights the deep seated suspicion and fear associated with general dealings with Nigeria and Nigerians.
Indeed Makerere’s claims to the DAP is riding highly on this perception.

Cost of IPO
This IPO is going to cost Government of Uganda 2,531,500,000 Ushs out of the envisaged 7,269,840,000 Ushs a massive 34.8%; Oh La La!

Allocation
IPO value of 7,269,840,000 Ushs makes this a small IPO just 10% of its predecessor Stanbic and frankly pro rata will not in any way achieve government’s stated objective of broadening direct share ownership.
Why pro rata cannot achieve this; assuming word in the corridors of Pilkington Street (akin to renown Wall Street) is that one foreign investor has lined up Euro 2 million for this IPO, that would be equivalent to approx 5,600,000,000 Ushs out of the 6,542,856,000 Ushs reserved for the general public hence direct pro rata would mirror a Safaricom kind of allocation with inconsequential allocations.
GoU’s objective can be achieved if the allotment is done on a basis of say, Every East African Investor is guaranteed shares worth 1,000,000 Ushs then after a percentage of the balance; of course this can only be determine after analyzing the application results, We trust MBEA the sponsoring brokers will take keen note of this.

Accounts
For the record we are not a certified accountant, so judge for your-selves as well.
As long term retail investors we are perturbed by these facts as per the financial statements:
Dividend payout policy: NIC has been a darling of its short-term shareholders paying out an average 78% of profit as dividend from the years 2005 to 2008.
It is reverse impressive to note that they have been overstretching themselves to keep their shareholders smiling considering in 2006 they paid out 807,760,000 Ushs compared to a profit after tax of 497,674,000 Ushs thereby dipping in their reserves.

Deferred tax Liability
These are tax obligations postponed and they attract interest once they become Outstanding, the issue here is about the amount of 9,165,624,000 Ushs in comparison to the net profit of 3,023,367,000 Ushs as at September 2009.
It is common practice that Insurance companies operate on liabilities (premiums) but this accumulated tax liability vis a vis high percentage dividend payout does not project foresight.

Last word
IGI has done a commendable job in turning around NIC in the last four years nonetheless their commendable effort, in terms of value they are offering to investors on the Stock Market, almost equals to what is already on offer in the Secondary market as represented by: Stanbic Bank, New Vision and the DFCU counters with Price Earning ratios between 10-15 compared to NIC’s 6 yet these companies have broader and deeper upside potential in terms of expansion and consolidation.
Star Traders’ would therefore, with a pinch of salt, recommend that NIC be a Short-term buy to take advantage of the short lived IPO excitement and probably the absence of the 2% brokerage fee.
After questioning one of the brokers on the logic behind especially regarding the NIC financials, he had this to say “If you do not buy into NIC, rest assured the Nigerians will! IGI Plc is the Underwriter.”
Yeah, right and most times that’s what the Stock Markets are all about, Star Traders’ believes now you can form an independent opinion.
Good luck and all the best to you Investors in this New Year 2010.


Acronyms
IPO- Initial Public Offer (Primary Market)
EPS- Earnings per share, is amount of money each share earns, say for NIC each
share worth 45 Ushs has earned 7.5 as at 30/09/2009
IGI- Industrial and General Insurance
NIC- National Insurance Corporation
Ushs- Uganda Shillings

Key words
Actuary- one who makes calculations for Insurance companies.
GMP and the Trust Deed and Rules- instrument binding the Makerere DAP Scheme.
Underwriter- one who undertakes to purchase shares, at a fee, incase of
undersubscrition.

Exchange Rates
1 Naira = 25 Ushs
1 Kshs = 25 Ushs
1 USD = 1,920 Ushs
1 Euro = 2,750 Ushs


“Teaching investors to count is fine, but teaching investors what counts is best”
The author is a blogger based in Entebbe
Mob: +256 702 431064
eatrader@gmail.com

HUMOUR*: NIC Cash Cow

The National Insurance Company is currently receiving premium for Two (2) state of Art Gulf Stream Presidential Jets, yet the President of the Republic of Uganda has of late taken to flying Economy class, where is the risk! These are just cash cows…
*One of the more endearing arguments given while deliberating on Star Traders’ official article on the NIC IPO (to be posted by the 15th January 2009)