Friday, December 14, 2012


I take this opportunity to congratulate the HERD (composed of the 21 foreign investors), I must add you guys are SMART, the NSE listing is major coup for you Guys.


Thursday, December 6, 2012


Important Allocation Statistics:
Total Shares on Offer: 622,378,000
Total Shares applied for: 851,760,820
Status: Oversubscribed by 36.85%
Total number of Shareholders: 6,471

Below we shall go ahead to breakdown and respectively comment on the investor segments:

Employees and Directors
The 1,310 employees and Directors applied for 25,504,600 shares all of which were fully allotted. This segment was entitled to Grant shares totaling 13,500,000 just less 400,000 shares were granted making the total Grant shares issued 13,100,000 shares.
Out of the 1,310 only 225 employees and directors applied for additional shares besides the Grant therefore all 25,504,600 were amongst the 225 employees and directors giving them the 10% incentive shares totaling 2,547,900.
Star Traders’ take:
Low employee turn up for the IPO to pay for shares 225 out of 1,310 is not very encouraging, though UMEME has some incentive safeguards for employees who hold their shares, one cannot rule out a dumping spree recall the 13,100,000 shares whatever else one may call them came at 0/= cost or bonus to staff therefore a 200/- sale amounts to 200% return.
This segment took up 4% of the allocated 9% for the IPO, therefore undersubscribed.

Retail East Africans and other pools
This segment attracted 5,002 investors applying for 111,109,700 shares with all fully allotted therefore no refunds.
The promised customer incentive 10% shares were 10,103,400 shares from a guaranteed 19,000,000 shares (employees took 2,547,900 shares as well),
 Star Traders’ take:
UMEME customers did not turn up for the shares as they took up on 46% of the guaranteed 10% incentive shares, this segment took up 18% of the 20% IPO allocation therefore undersubscribed.
The lesser take of up the incentive shares which would average out the acquisition price to 247/- is a plus for price stability as this segment has more leeway to sell shares- smaller quantities and are non-employee shareholders

East Africa Qualified Institutional Investors sub-pool
The 138 investors applied for 406,158,100 shares and were allotted 198,463,700 shares a 48.9% oversubscription
 Star Traders’ take:
These being East African companies will have to stick like a duck, with their action limited to buying more otherwise where will they invest (A dilemma NSSF Uganda has), they basically sink or rise with the core investor- if Actis ‘catches a cold they sneeze’, these are the concession bait they will fight to ensure all is smooth and the earlier Actis courts them the better prospects for UMEME

International pool- THE HERD
Consisted of only 21 investors applying for 307,988,420 shares getting allotment of 286,300,000 shares a 93% oversubscription.
 Star Traders’ take:
Surprisingly 21 investors determined the price, our belief it could have been the reason UMEME’s allocation results delayed by a full two weeks, as the parliament report on UMEME was leaked in the mass media, it would have thrown a spanner in the works if it was revealed then that 21 investors had taken 46% of the IPO.
Our suspicions of the HERD still remain, they will probably trade amongst one another, in investors like the World Bank’s private arm IFC they have some clout and could come in handy regarding socio-politico struggles

Last year in 2011, the Government of Uganda’s Parliament undertook to investigate what really happened in the Privatisation of the then Uganda Electricity Board the single Power sector player which culminated into 5 independent Companies UMEME inclusive. In a nutshell Parliament says the contract signed was unfair to the government of Uganda and therefore her Citizens. No-doubt the contract whether fair or unfair will be respected however the ‘noise’ could culminate into the NIC (also listed on the Uganda Stock Market) Vs ‘noisy’ Makerere University Lectures’ Pension Scheme, where the core investor (in this case the British government affiliated private equity firm ACTIS) is worn out from non business challenges.
On Vs Uganda this will rotate around power tariffs which are to charged in dollars and varied monthly based on inflation, exchange rate etc etc  

1st 5 Trading days
UMEME shares were listed on Friday the 30th of November 2012, at an exclusive ceremony at the Sheraton Kampala Hotel.
Day One: opened at high of 295/- then to low of 270/= closed at average price 275/- (same as IPO)
Day two to four: traded steadily between 275/- to 300/- with pending supply at 300/-
Day Five: Steady at IPO price 275/- with reasonable demand at 275/- and supply at 300/-

Last Word:
We still maintain the 250-350 trading spread for the UMEME shares, not much excitement on the bourse yet; could see some briefly once their financials are released with first three months of 2012; could see a dividend yield of 3% to share price in the crazy dividend payout policy of 50% is effected for a company in Growth stage.

Star Traders’



Anonymous 1: You’re Welcome
Your welcome, matter of fact there are a good number with the experience and insights even better than ourselves sadly they do not write or even pen an article for say a blog or newspaper. Thanks for the appreciation

Anonymous 2: No one is smarter than the Market, Impossible to tell exact price
250-350 projection an 100 shillings spread over 12 months was reached upon in the following way:
for the 250/= in the event there is a SELL share stampede and considering the 10% Incentive shares to the UMEME customers averages the price to 247.5/= this gives a reasonable bottom to the price- It could go lower we cannot tell for sure.
For the 350/= in the event they go with the 50% net profit dividend payout while accumulating quality debt to enable there is cash-flow to pay high dividends, we feel 350/= is reasonable especially based on UMEME’s peer Company in Nairobi i.e Kenya Power and Lighting company

Anonymous 3: You are your own Keeper
Fastidious indeed, that’s the meaning of Capitalism- You are your own Keeper in this event the responsibility squarely falls on the Investor to take and own the decision. Like ourselves we are just practicing investors who write base on our experience of investing to give insights and gut feelings

Thanks all for reading and going ahead to comment
 best regards
Star Traders’
Entebbe, Uganda.

In short while will post; How the UMEME IPO allocation played Out as well as comments on the first 5 days of trading.