East African Star Traders'

Star Traders’ Monthly Briefs: JUNE 2011

2011-07-06T11:20:00.002+03:00

1. Stock Brokers’ Capital Guarantee up 150%- welcome to The Animal Farm
The Uganda Securities Exchange in the month of June 2011 increased the Capital Guarantee from 40m (UDS 16,000) to 100m (UDS 40,000).
Capital Guarantee is the money the Stock Broking firms deposit on the USE account as a guarantee in the event.
Star Traders’ views this self regulation strategy not as a way of protecting investors as the Stock Market wants us to believe- BUT as a strategy of ring fencing the brokerage business
Impact
Was chatting with a Stock Brokerage business owner he said “The market can only handle 4 brokerage firms yet currently we have 8 active brokerage firms- we are saturated” I argued to him that that such radical regressive measures tending to the glass half full mentality only work towards maintaining the status quo and stifling innovation
Of course from his side there is an advantage of blocking out/delaying competition (smaller firms intending to join the Brokerage business will find it difficult to put aside USD 40,000 which could be a massive challenge to their working capital requirements)
HOW
The existing Brokerage firms will instead fight a small and stagnant pie (like NSSF and new pension firms market) and not push to have more independent IPO’s (IPO detached from the government’s Privatisation policy that is currently responsible for all primary listings at the Uganda Stock Market)- they will not aim a deepening the market reach to rightly position it as a platform of cheap and available Capital to growing Small and Medium Enterprises with additional benefits of Corporate Governance and continued capital source through rights and bonus issues

Star Traders’ Take:
THIS IS VERY MYOPIC OF THE USE Management, Lets learn from the innovation brought in by competition in the Telecoms industry where in 1997 it was though Uganda had a maximum clients base of 4,000 people yet today 2011 Uganda has close to 15,000,000 millions mobile phones; on the Stock Market we around 25,000 individual investors.
CAPITAL MARKETS AUTHORITY SHOULD CHECK THIS OUT, the Market is not there for a select number of Brokers! The industry needs reasons to penetrate both the population and Companies that need Capital- it is the only way to grow in-depth and quality just like it happened in Vietnam.

Lighter Note: As a way of enforcing this new requirement Stock Brokers from the Brokerage companies that had not as yet deposited the 100m on the USE account were physically barred from trading in the month of June 2011.

2. DFCU: 60% holding transfer
Listed in October 2004 at an IPO price of 230/= per share and is now trading at 1,000/= per share; DFCU has a fixed dividends policy of paying out 40% of net profit in dividends.
DFCU Background
dfcu was established in 1964 as a development finance institution. Over the years dfcu has been associated with many success stories in Uganda’s economy in various sectors: transport, education, floriculture, agriculture,manufacturing and agro-processing. In 2000, the company bought Gold Trust Bank and startedcommercial banking and renamed it dfcu Bank. Today dfcu Bank is a fast growing commercial bank offering a variety of innovative products and services:

“Actis, a British investments company and majority shareholder (editor: representing the CDC Investments) in Dfcu Limited plans to sell a major stake in the bank to its managers Daily Monitor has learnt. Actis which is part of the Commonwealth Development Corporation owns 60 per cent of Dfcu. The CDC is the United Kingdom's development finance institution.”
Full article: Actis to Sell major stake in DFCU Bank

Star Traders’ Take:
Initially the information I had pointed to the Uganda’s NSSF plan to acquire the 60% holding, maybe the Actis Managers are moving towards that. It makes sense that NSSF takes this stake as it positions herself for the Liberalised pension sector, I have my reservations on interfearence in Management in the event NSSF buys out Actis; but hey lets wait and see

3. Probable IPO: Uganda Finance Trust Limited (MDI)
Background
Uganda Finance Trust Ltd MDI (Finance Trust) is one of the oldest Microfinance Institutions in Uganda having started its operations in 1984. The company is licensed and regulated by Bank of Uganda as a Micro Deposit Taking Institution (MDI) and is recognized as a key player and part of Uganda’s formal financial sector.

The company has one of the largest branch networks in Uganda with 28 interconnected branches strategically positioned all over the country and serves over 140,000 customers with a variety of savings and loan solutions including business loans, salary loans, school fees loans, savings accounts, fixed deposits and a money transfer service through Western Union Money Transfer.
The company has a diversity of shareholders mixing both local and international players i.e. OikoCredit from the Netherlands, I&P from France in addition to UWFT (a local NGO), a group of Prominent Ugandan women entrepreneurs (founder members) and others.
Website: http://www.financetrust.co.ug

Star Traders’ Take:
If all goes well this will be the First Company to have a Primary Listing on the Uganda Stock Market outside the government’s Privatisation policy. I believe the Listing is aimed at Capital accumulation to move up the Financial Sector Tiers probably to a fully fledged Bank in the not so far future.

Star Traders'- THINK SHARES

Stanbic hits 350/= per share

2011-06-10T13:53:00.002+03:00

On the last day of its Bonus trade, Stanbic bank shares touched a high of 350/= a share, a 30% price gain compared to average trade price of 270 over last Two months, a record price since it IPO listing at 70/= per share at the beginning of 2007. The price has settled in the 330/= per share zone in today's trading.

Bonus Books Closure and Price discovery
It will be interesting to see what the price will be between the Stock Market Bonus book closure date (Today 10/06/11) and the Stanbic Bank Limited Bonus book Closure date due on the 17th June 2011. Reason being- You Sale and Buy without Bonus AND at what price??????

Hindsight
for Baroda Bank in the same situation recentlty there was a deadlock- NO SHARES EXCHANGED HANDS, in this lacuna period, LETS SEE WHAT THE BROKERS BRING THIS TIME CONSIDERING STANBIC IS THE MOST LIQUID STOCK IN UGANDA.

WILL BE WATCHING THE BROKERS ACTIONS KEENLY

Star Traders' expects Stanbic to trade between 180-210 shillings per share after bonus shares start trading on the 20th June 2011.

Update- 17th June 2011
Well as usual CFS (Crane Financial Services) played its role as the brokers trend setter by trading 200 shares worth 40,000 Ugx (approx- 16 yes 16* USD) so to speak they tasted the waters in this lacuna period! below is a record of trade.
* 1USD = 2,415 Ugx

Date Number of shares traded Turnover Average price
13th June 2011 200 40,000 200
14th June 2011 20,694 3,517,980 170
15th June 2011 734 124,780 170
16th June 2011 143,012 24,246,980 170
17th June 2011 1,805 306,850 170
source- USE market reports, 13-17 June 2011

INVESTOR ALERT- pro-Investor communique
"Prepare Yourself
Only shareholders with a Securities Central Depository (SCD) account shall be able to receive the bonus shares. It is expected that the bonus shares shall be deposited into the SCD accounts of shareholders within the next 60-90 days. If you have Stanbic Bank paper share certificates but have not yet opened an SCD account, contact Crested Stocks and Securities immediately for action.
Withholding Tax
The bonus shares may attract a charge of withholding tax to shareholders. As this issue is still unresolved we shall provide our clients with details once Stanbic announces the way forward.
Effect of Bonus on Market Price
The U.S.E. book closure date was 10th June therefore the share is trading ex-bonus (in other words, the shares trading now will not qualify for the bonus). This week SBU has traded in the range of 165 – 200 Ush per share. This is the equivalent of a pre-bonus range of 330 – 400 Ush. We advise clients that the price discovery process for SBU is ongoing and to contact us with specific questions about the current pricing.
Our offices are located at Impala Hse 6th Floor, Kimathi Avenue Tel. 0414230900 or Email. info@crestedsecurities.com. Open: Mon-Fri 8:30 to 6:00pm and Saturdays 9:00am to 1:00pm." Crested Stock Securities Kampala's Investor Alert on Stanbic Bonus
Star Traders' appreciates Crested leadership role in Investor Education, thanks CSS.

Star Traders' Take!
It is very clear we are in an information age those who seize the opportunity gain! it has not helped that Stanbic to-date has not started on the process that will bring the bonus issues on the market, we are now TRADING IN SHARES WITHOUT THE BONUS AROUND IN REAL TERMS YET THE PSYCHOLOGY OF LEADING US TO TRADE OR BUY HAS THE BONUS SHARES IN MIND. Not many Investors can fully comprehend this (took me sometime as well) whereas some are bound to gain (SELLERS) others will definitely lose (BUYERS) imagine the bonus shares may come on the market earliest September 2011.
Uganda Securities Exchage, Brokers and the Capital Markets Authority of Uganda WE CAN SURELY DO BETTER THIS IS OUR MARKET ALL- GUARD IT.

N.I.C May 2011-Suspension (17 July 2011)

2011-05-27T15:05:00.003+03:00

WHEN IS THE NATIONAL INSURANCE CORPORATION RELEASING HER FINANCIALS AS AT YEAR END 2010?

After the departure of Makerere's DAP scheme is there a dividend??????????

You cannot blame one for calling it the Nigerian Insurance Corporation! watch out in your national press.........

Update- 17th June 2011
As per your national press
In Today's Uganda daily Monitor newspaper page 13 NIC has released a press statement (PUBLIC NOTICE) explaining the delayed release of 2010 Financials stating the reason as Approval from the Uganda Insurance Commission before they can do so.

Very interesting angle if you ask me! reason there is a clear difference between an External Auditor and Regulator.

Is NIC finding it hard as a listed Company? recent management changes, bad press from Makerere pension scheme or sheer internal disorganisation?

Update- 18th July 2011
The NIC counter has been suspended following its failure to release their FY10 results before the deadline of yesterday. NIC is the first counter to be suspended in the history of the 13 year old stock market.

Star Traders' Take
This suspension is not good for market confidence; this NIC problem is more than release of 2010 financials, you just need to read what could be boiling under...DAP Makerere Scheme,one of the items i prioritised in Star Traders' NIC IPO Analysis back in january 2010, can read it by clicking the Link.

BEYOND THE ORDINARY EYE

Makerere University staff threaten strike over savings
The above Daily Monitor Link tells you a bigger part of the story everyone in the industry doesn't want to admit,
quote extract
"The report dated July 6 and titled, “Verification of the Makerere University deposit administration pension scheme managed by NIC, indicates that NIC owes Makerere University Shs22.3 billion.

Conducted by PriceWaterHouseCoopers (PWC), the report, signed by the Auditor General, Mr John Muwanga, shows that the value of the DAP fund as of August 2010 is estimated at Shs22.5 billion in respect to the existing members and Shs4.4 billion to members who left the scheme."
For me this summarises the pressure and tension the NIC management and Directors could be tackling, RECALL the MAkerere DAP scheme stood at around 30% of NIC balance sheet and abruptly losing such a client can strain a company to unimaginable risk involving forced liquidation and other intangibles like trust- all this is not helped by the fact that the majority shareholder is NIGERIAN- wowhhh!!

Investment Clubs: The Ugandan Rats Story

2011-05-22T16:37:00.000+03:00

Investment Clubs: The Ugandan Rats Story

Author: Paul

How well have you positioned yourself for a great financial future? Hang on a second… Are you confident that your current investment efforts will yield a much better return? May be you have strategically positioned yourself for that huge ‘insider deal' at your work place and before you know it your name will have flooded on the local print media. Hope not because this is your wake up call! It's just hilarious to hear them call themselves ‘The Rats'. I guess you abhor these small creatures like I do unless you come from Tororo where am told they can eat them to convey their anger. My perception of them though, as I write this, has changed. Certainly there is a brilliant reason why a team of seventeen Ugandan ‘moguls to be' prefers to be called ‘The Rats'. Together they boast as one of the few modern investment clubs our mother country has ever had, The Rats Network Savings and Investment Group(RNIG).

We may be making some unforgivable assumptions here, what is an investment club? Jesse Ibanda, the chairman, RNIG confidently defines such a club as ‘a group of friends or co – workers who typically meet regularly to, create a pool of money and discuss investment ideas so they collectively make decisions on investments, members usually take turns reporting and researching on possible investments.'

How they started

Amazingly enough, the Rats Network Savings and Investment Group idea came to life when two groups of like minded school leavers of Makerere College School and Gombe Secondary school met at Makerere University Business School for their university education. At the university these two diverse groups found themselves playing the Cashflow Quadrant Board Game (invented by the Rich Dad Poor Dad author Robert Kiyosaki) at Akamai Global. After occasionally getting stuck in the ‘Rat Race' they gradually realized that solo/lone investments had limits of progress. In the game, a successful player ‘jumps out' of the ‘Rat Race' into the ‘Fast Track' where he or she joins the world of financial freedom. They therefore thought it wise to jump out of their ‘Rat Race' strategically by organizing themselves into an investment club and tap into the strength of numbers. In January 2008, RNIG effectively started as a savings and investments club and on 14thSeptember 2009, RNIG's holding company Melrah Investments Ltd was incorporated with each member owning equal shares. This was a major stride as it implies that each Rat's liability to the club's debts is limited to his or her worth of shares. Andrew Muhimbise, the group's Assistant General Manager, recommends that organization in such a club is quite critical. The Rats are therefore organized into three investment units; Capital ventures, Securities and Credit as well as Property and Real Estate.

The ‘Rats' at work

A Rat saves Ugsh. 50, 000 a month. What would be their combined 5 - year saving based on a membership of 20? Ugsh.60 Million I guess. How many of us the youth can save that on an average income given the high standard of living in Uganda today? Currently, their monthly inflows are averaging Ugsh.650, 000 a month. With their strategic intent being to rival the renowned NSSF in portfolio holdings, they saw their annual collections in 2008 amount to Ugsh. 3,650,000. In 2009, this shot up by 27.2% and in 2010 annual inflows amounted to Ugsh. 16,270,000. The Rats attribute this consistency to accountability and trust among the members. Over the past two years, the Rats have managed to invest at the Uganda Securities Exchange, Equities division with their stock picks being; Stanbic, DFCU, Uganda Clays, NIC and New Vision. The above have been generating some worthwhile dividends for the club. On their list too is a short term investment with Golden Bees Ltd, a honey processing and packaging private company. Beside that, the group is currently in the process of acquiring a 20 acre parcel of Land in Mukono District, 42 km from Kampala where they plan to engage in group farming. Borrowing a leaf from the Bugisu Co – operative Union, the Rats major mentors, they believe group farming will give them a competitive edge.

Your choice…

The Rats slogan is ‘better together'. True to their slogan they are on a journey to achieving their ultimate vision of financial freedom collectively. All the Rats have attested to the fact that there is strength in numbers. You have two choices; either form a club or join an existing one. You are likely to benefit from a cushion against risk if you are the kind that is terrified to invest. Moreover, it will be a chance for you to guide your own personal investing, the club has done so why not parallel your investments as well? On the other hand, your membership will come with a number of challenges. The Rats recommend that if you are to form an investment club, at least avoid personal disagreements which most likely sprout out of romantic relationships gone sour. Hence bar members from admitting their girl/boyfriends but only for committed spouses or partners. The Rats also point out that you should endeavor to look out for individuals from different career backgrounds. What will happen if you admit only lawyers to your group? Every one will want to give an opinion all through. You will lack executors! Do you think you have much of a choice? I vehemently don't. If you think you do, then read about The TransCentury Group in Kenya. The good news is that if you decide to form an investment club today, the Rats will be more than willing to mentor your club.

Article Source: http://www.articlesbase.com/investing-articles/investment-clubs-the-ugandan-rats-story-4768715.html

About the Author

You finances don't come with an instruction manual... Its my pleasure to guide you.

Article Summary:
The Rats Network Savings and Investment Group confidently defines such a club as ‘a group of friends or co – workers who typically meet regularly to, create a pool of money and discuss investment ideas so they collectively make decisions on investments, members usually take turns reporting and researching on possible investments.'

Interested call: +256 712 807627, Rats Chairperson.

ELEVEN BILLION NEW YEAR GIFT; Welcome back Home NSSF.

2010-12-28T12:54:00.003+03:00

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

2010-12-10T09:22:00.000+03:00

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

2010-10-30T12:49:00.000+03:00

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

2010-09-30T18:52:00.000+03:00

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...

2010-09-03T11:51:00.001+03:00

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

2010-07-08T21:07:00.002+03:00

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

2010-07-03T13:49:00.000+03:00

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.

2010-05-12T08:21:00.000+03:00

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

2010-04-13T09:06:00.000+03:00

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

2010-03-29T13:15:00.000+03:00

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

2010-03-25T12:27:00.000+03:00

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.

2010-03-23T18:09:00.000+03:00

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?

2010-03-20T11:38:00.000+03:00

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

2010-03-10T11:21:00.000+03:00

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

2010-02-22T13:26:00.000+03:00

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

2010-01-15T09:04:00.000+03:00

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

2010-01-12T10:20:00.000+03:00

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)

NIC IPO

2009-09-25T11:10:00.000+03:00

Is the National Insurance Corporation's long awaited IPO finally on! watch this space

SHOULD I BUY STOCKS IN UGANDA NOW?

2009-09-23T09:08:00.000+03:00

The Uganda Stock Market is 11 years old this year with six primary listings of: Uganda Clays Limited, British American Tobacco, Bank of Baroda, Development Finance Corporation Uganda, New Vision Limited and Stanbic Bank Limited.
Currently the market is shrouded in the after effects of the: NSSF debacle, the Global crisis and Safaricom’s IPO aftermath.

On a lighter note the half year results so far released are defying the effect of the global crisis on the health of Ugandan listed companies with Stanbic Bank and DFCU each posting over 35% growth in half year profitability and over 405 in sales revenue.
The USE is due for Computerisation with the Securities Central depository system taking shape this means transactions will be automated making much faster and there will be no need for physical share certificates as there will be a centralized record of all shareholders and their respective shareholding.

Likely cycle (2009-2013)
We could witness share prices gaining a little in 2010 at the back of accumulated impressive results hence excellent Price Earning ratios (current share price compared to its earning power eg Stanbic is trading at 160 today and each share earns 15/= therefore PE= 10.6) in the ranges between 10-18.
However as the 2011 Elections draw closer these share price gains will be offset by the caution and uncertainty this brings along.
Regardless of the Elections outcome, my bet would be that the Uganda Stock Market shall have great year in 2013 as the election baggage fades away.

Share price movements: September 2007- September 2009.
Company
Stock Current price 24 months 24 months
Symbol 09/09/2009 High Low

UCL 70 250 65

BATU 370 1,465 370

BOBU 380 1,160 375

DFCU 500 980 390

NVL 770 2,645 770

SBU 160 250 120

SAFCOM 3.65 Kshs 8.15 Kshs 2.5 Kshs
Key:
UCL- Uganda Clays Limited
BATU- British American Tobacco Uganda
BOBU-Bank of Baroda Uganda
DFCU- Development Finance Corporation of Uganda
NVL- New Vision Limited
SBU- Stanbic Bank Limited
SAFCOM- Safaricom Kenya

Is it a great time to buy?
At the moment the Stock market belongs exclusively to those investors willing and able to invest over a longer period of time not less than Four years reason being:
2011 Presidential elections
In my opinion the Nairobi Stock Market was mainly brought to its knees more by the Kibaki-Odinga power struggle than anything else.
Back home: with a potential formidable opposition like was the case in Kenya, I hate to write this but by ignoring the likelihood of a ‘Kenyan Election’ replica does not mean it will not happen here; clearly the battle lines are drawn so to speak (Read bafuruki, splitting kingdoms). If this happens the Stock market will be knocked off its rails like happened in Kenya.

Uganda Stock Market is going through its toughest darkest time thus far with its estranged Market Maker, NSSF, not buying a single Share since mid 2008 thereby starving her of the much needed demand in a market where price movements are determined by market forces of demand and supply.
No doubt the BUYERS PARADISE is on now.
As captured in a Malcom X quote;
“It is only after the deepest darkness that the greatest light can come”
Do investors have the nerve and foresight to take advantage of this Paradise?

MJ- no am still alive and Thrilled

2009-07-10T10:10:00.000+03:00

Dear Readers'
My deep sincere apologies to all those who follow this blog;yeah have been away for long engaged in other projects. I cannot say fully back: but am around!
Thanks for all the Support, comments and people this is your blog as well write anything about the Stock Markets in East africa I shall publish your article.

NATIONAL INSURANCE CORPORATION IPO
Hah, if this IPO were a girl awaiting marriage she would have long gone in menopause before the actual marriage: in all honesty thats what NIC's IPO is, with a pinch of salt i read in the papers that they are coming on the 17th of July 2009; my foot!
Mark my words, i shall close this blog if they do.
Tentaively lets talk about the Last Quarter of the year 2009

RENAISSANCE CAPITAL SUSPENDED
A Broker suspended for 2 months and it is published in the Leading newspaper Dailies; i was abit taken aback, but knowing its for minimum capital requirements at Bank it did not surprise,
Uganda's Capital Markets Authority should have started on this (Public suspension) of brokers especially those involved in "real" unethical practices like creaming off the provident fund (NSSF). A typical case of remanding Chickhen thieves to Luzira Maximum prison and then Granting bail to the "Fat Cats".
My argument here is about the stinking Double Standards only.

NSSF Return
If you have ears you have probably heard about the meagre returns NSSF Uganda is going to offer to its savers of around 4% vis a vis the 14% embellished "Jamwa" ones.
Well Jamwa was undeniably a sort of saviour at the Uganda stock Market; shaking up the Investment Portfolio in Uganda equities from 5% to 30%, no doubt that ever since he left the Market has dearly missed.
There is talk that since he was a performer and is only serving his suspension we could see him back at the Monopoly Pension Fund.....

Cross-Listing of Kenya Commercial bank and Equity Bank
Two of Kenya's celebrated Banks were cross=listed here in Uganda. Not that am against the East African Community but sincerely when you come to look at this- Is it not Public Relations stunts (not withstanding the proposed East African Stock Exchange- which may need a single currency).
The cross listed companise now account for over 85% (7-07-09) of our market Capitalisation.
Imagine this: a Ten percent fall or rise in the Cross Listed Companies would result into a an exaggerated rise or fall on the Uganda Stock Market, which is not reflective of Trade in the primary Listings... I think this is misleading to those investors who track Indexes.

Credit crunch: ‘Ugandanised’ Explanation.

2009-03-12T11:35:00.000+03:00

A lot has been said about the raging credit crunch in mostly the Western Hemisphere, Star Traders’ puts some familiar names and scenarios to help its readership really understands this ‘thing’ that has taken on as the best excuse to explain cash matters be it by individuals or Corporations. Nice reading and please send your comments.

Nalongo is the proprietor of a bar in Luzira. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood into Nalongo's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Nalongo increases her prices for waragi and beer, the most-consumed beverages. Her sales volume increase massively.

A young and dynamic customer service consultant at the Luzira UCB bank branch, called Musoke, recognizes these customer debts as valuable future assets and increases Nalongo 's borrowing limit.

Musoke sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At UCB's corporate headquarters, expert bankers transform these customer assets into BELLBONDS,CLUBBONDS and WARAGIBONDS. These securities are then traded on securities markets in the East African Region. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a Risk Manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Nalongo 's bar.

However they cannot pay back the debts. Nalongo cannot fulfill her loan obligations to UCB and claims bankruptcy.

BELLBOND and WARAGIBOND drop in price by 95 %. WARAGIBOND performs better, stabilizing in price after dropping by 80 %.

The suppliers of Nalongo’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her waragi supplier claims bankruptcy, her beer supplier is taken over by a competitor.

UCB is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests).

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation we can understand...

Thanks to Watmon Mike Kinyera for original forwarded message.

Policy Options: Mutebile’s high interest rates now ridiculous

2009-02-25T17:16:00.000+03:00

Bank of Uganda has successively increased its lending rates in Uganda since the third quarter of 2008. When the Central Bank started increasing the rates, Uganda was registering record high inflation rates, and the upward swing in interest rates was warranted.

Last month, the central bank further increased its bank rate to commercial banks from 17.20 to 18.42 per cent. Consequently, banks like DFCU and Barclays adjusted their lending rates above 19 per cent per annum citing high costs of borrowing in the market -which makes sense.

To the ordinary Ugandans who borrow from these banks it means that they now have to pay higher charges on loans compared to the past months. With the ‘madness’ among commercial banks, rates will shift from the 16-27 per cent bracket, to that of 19-35 per cent. I know, the Central Bank is convinced that the high interest rates will mop up the “excess liquidity” and eventually translate into single digit inflation, in a bid to achieve price stability and a sound economy but, should it come at the expense of growth during a downturn?

When BoU was increasing the cost of borrowing last year, most global central banks like the European Central Bank and Federal Reserve were doing the same –it made sense. Most nations were aiming at reducing the high inflation that emanated from very high food and fuel prices. This was because China and India, the fastest emerging powers of Asia were buying too much of everything and the impact of their demand was felt worldwide.

In September, what many non-Americans thought was a United States’ mortgage crisis turned out to be a global financial crisis. A month later it was obvious the crisis was spreading like the Australian bush fires instantly burning stock markets, and exchange rates yet remittances were nearing their worst decline. Mr Emmanuel Mutebile, the Governor BoU took some steps to rescue our weakened shilling.

Together with Ex-Finance Minister Mr Ezra Suruma, they further painted a grimmer picture of 2009 remittances, Foreign Direct Investment (FDI) and donor aid. To my surprise, the prophets of doom have stuck to the rigid principles of macro-economics to overcome the ripple effects of the recession in the West and our national slowdown. Yet, the founding fathers of capitalism are reversing their doctrines to address the commotion in their economies.

Clearly now is not the time to fight inflation by hiking interest rates, as Mr Mutebile is doing. Globally, Uganda now seems to be alone on this battle front. Mr Mutebile knows high rates undercut the amount of credit/money people can access. He also knows that in the next weeks and months, FDI, remittances, tax revenue and companies’ earnings will dwindle.

What this means is that there’s going to be less cash available to Ugandans to spend. But the Central Bank is now making it harder for many poor Ugandans to access cash by making it more costly and -stubbornly keeping it in the hands of a few. So, it’s not by accident that banks now prefer to venture into petty products like school fees loans for cash-strapped parents.

We should know that sticking to text-book economics in these tough times is fiscal suicide. BoU should for a while shelve the catastrophic philosophy of economics and consider thinking outside the box. Now is the right time to ease rates to place cash in the hands of more people to stimulate investment by locals, to create more jobs and spur the economy into positive growth.

Our 2009 GDP growth rate has been revised to about 7.4 from about 8.9 per cent last Financial Year. That’s a contraction of 1.5 per cent, with such a decline, Mutebile should instead focus on cutting lending interest rates by over 1.5 per cent and transfer the high rates to government securities, to woe buyers. It doesn’t seem sound for a central bank to worry about high inflation when fuel and some food prices that sparked off abnormal inflation rates are now easing?

To mop up “the high liquidity”, as a nation, we need to halt our unnecessary external borrowing, reduce public administration costs especially the fuel and communication bills by utilizing Dr. Ham-Mulira’s e-government project to attend meetings, and limit the amount of food exports to Sudan among others. It is also important that government starts sensitizing Ugandans about the economic slow down and advise them to reduce their unnecessary expenses and increase their sources of finance.

For a government that will not unlock even a million dollars as an economic stimulus package to strengthen its economy these are options.

by;
Walter Wafula
Walter is a Ugandan Journalist.
Contact; Wafwalt@yahoo.com.
+256 773 459765.

Editor:
Bank of Uganda reversed its decision on the increased Bank rate of 18% (probably this article was part of the pressure), the current Bank rate is 15%.
Thank you.

ACQUISITION, TAKEOVER

2009-02-16T13:19:00.000+03:00

WHAT IS IT? ARE WE ABOUT TO SEE THIS ON THE UGANDAN STOCK MARKET, WATCH THIS SPACE AS YOU INVEST.

HAKUNA MATATA

Impact of share price fall on Business community

2008-12-12T12:50:00.000+03:00

Share traders'

These are classified into two depending on how long they hold onto the stocks they buy:

Investors,

these have a long-term outlook when they invest in shares here the typical example for our case is the provident fund NSSF and corporate investors.

The impact here is that their portfolio holdings value has contracted (some of NSSF's record earnings of the other year has been reduced) in the short to medium term however on a more positive note there is a sizeable supply of reasonably priced shares.

Speculators,

these invest for short-term and usually need their money back for other needs within a year. In my view these are the hardest hit of all stakeholders: they came in to make money which by the way they did and are still in the positive, but it was way below their exaggerated expectations, these were mainly ushered in after the mammoth (Uganda standard) Stanbic IPO and are now in stampede selling to salvage their remaining returns,

The negative impact is that they have lost 'imaginary' money vis a vis their expected returns and this kind of industry issues like this count- more like a fall in confidence as regards the Stock Market.

Brokerage firms, Uganda Stock Market and Capital Markets Authority

These are the middlemen of the Stock Market nothing happens without their input, they earn off statutory commissions shared amongst them, the Uganda Stock Exchange and the Capital Markets Authority (CMA).

The negative impact is primarily the crisis of confidence gripping share traders' (investors and speculators) then revenues as turnover has nose dived but most of them are either desk offices mainly in banks or subsidiaries of established Brokerage houses and I believe they have alternate sources of income, besides I highly doubt we shall see pre-Stanbic IPO turnover where they survived for over 6 years.

The positive impact has to do with one of my favourite quotes from:

Malcom X "It is only after the deepest darkness that the greatest light can come" this is an opportunity for all the tier one industry players (Brokers, Stock Market and CMA) to bring in as many Investor in the market.

Listed and soon to be Listed Companies

The Publicly listed companies which are six in total have been impacted on perception; especially when share traders' hear of bigger companies in the western world being bailed out there is this misgiving on the heath and operations of a company operating in the third world.

The other impact of this bearish run could be on the ability to raise funds on the market through IPO, rights issue (like NVL did in July), lisiting of Corporate bonds. Let me use the National Insurance Corporation long awaited IPO could have been pushed further fearing the backlash of an under subscription like recently happened to the Co-operative Bank in Kenya where Subscription was 70% (meager considering East Africa recent listings).

The beatiful Lake Bunyonyi found in South Western Uganda, Kabale district
At 900metres deep its second to Lake Tanganyika in Africa.
Can shares in Uganda reach thet depth? I do not know for sure.

Star Trader

Why Kampala Share prices are tumbling! Think About It.

2008-10-30T13:54:00.002+03:00

Prices at Uganda’s only Sock Market in Kampala have been on a free fall over the last few weeks (see Table 1); this has among other things led to stomach ulcers as one of trader’s (investor) complained.
With some Brokerage firms giving inept reasons like School Fees even before schools break off, www.eatrader.blogspot.com decided to dig deep and came up with the three core reasons as to why Share prices in Uganda are plunging and assigned each, on a total scale of 10, points for their likely impact on price movement.
Below are the core reasons for the downward price movement.

(i) Fear
Also known as panic, spawning from the current Global Financial Crisis which apparently is presented by some sections of the Ugandan media and ‘experts’: as though what the people who sent a rocket to the moon may not be in a position to solve!
With so much information on Cable Television showing the Developed World Stock Markets sliding each passing day: there is this invisible force that makes us OK with our market coming down (psychology) when we are very aware that the companies listed on our Exchange are LIQUID and do business in the region therefore in part
de-linking them from the major outcomes of this crisis.

Likely effect of the Global Crisis coupled with an optimistic outlook.

Aid
True if aid to Uganda reduced because of this Crisis, our financial system would be affected, BUT is it a given that it shall happen? may be not to Uganda because: well aid is a moral obligation almost like religion, starting 2009 Uganda shall be a temporary member of the all powerful 15 member state United Nations Security Council therefore shall be rubbing shoulders with some of the generous donors and lastly we have been able to cut donor dependence to 30% of the National Budget.

Remittances (service export)
Yes our brothers and sisters in the diaspora shall tighten their purses and only release money for the basic needs of life like: feeding, education and health leaving out investment.
On second thought how many of our brothers and sisters are working on Wall Street? Think about it, I mean most of the job losses are in the financial sector unless we are talking about the snow-ball effect that may not happen if the crisis’s impact is lessened early.
Probably a withdrawal by the Americans from the Iraq war would affect us more with 8,000 Ugandans in Iraq remitting close to $60m a year.

Export earning
We export a lot of raw material: coffee, fish, and frankly its not in the developed world interest to shut down their factories that add value to these materials hence the bailouts (nationalisation) currently going on: Given: demand shall scale down but it won’t go away.
That said our biggest export destinations are within the region: South Sudan, Rwanda!

The Global Financial Crisis has no doubt brought a fall in confidence of the investors on the Ugandan Stock Market and this explains the fall in prices as investors are in a stampede flight to safety by irrationally selling their holdings, even though the Fundamentals of our Economy are strong to quote Mr John McCain rightly for Uganda’s case.
Impact on Market: 3 out of 10

(ii) Politics
According to my desk dictionary, politics is defined as: the matters connected with the government or organization of a country or group of countries. In our case it’s the matters concerning a government organization and that is the National Social Security Fund (NSSF) monopoly.
A quick memory refresher about the NSSF: is by far the biggest single (individual or institutional) investor in the Ugandan Stock Market accounting for more than one-third of the free float shares (shares that are freely transferable on the stock market eg Stanbic Bank has a free float of 20% with the other 80% held by Standard Plc South Africa) on the Ugandan Stock Market.
We all know that NSSF has a terrific Liquidity position-recall the 1 trillion Ug shs- this could actually have led to the current NSSF/Temangalo Land transaction (check mainstream Ugandan media for details) which has paralyzed it as a major participant in the Ugandan Stock Market- I mean with the improving Price Earnings ratios of Companies listed on the market looking attractive coupled with a good supply stream of shares : why would the principal Market Investor not take interest or better still buy up the excess supply?; perhaps their board and management are embroiled in the Temangalo Land fiasco fighting for their own life so the stock market is not priority at the moment.
This has starved the Stock Market of its biggest buyer therefore temporarily crippling Demand.
Note: Some of the Fund Managers in the developed world I have exchanged with assign Politics the highest points in their risk assessment parameters for our Emerging Markets.
Impact on Market: 3.5 out of 10

(iii) Safaricom- the IPO aftermath.
Slightly over 6,000 individual Ugandans partook in the Safaricom IPO with Great Expectations; the whole money commitment was around 60,000,000,000 Uganda shillings of which IPO Loans from Commercial Institutions accounted for 16% of that, not mentioning the family & friend’s credit and the informal credit sector (Loan sharks).
Stanbic Bank’s earlier IPO had unleashed a greedy class of Traders’ (Speculators) who were not going to miss the next money train- I mean some arguments went like: Safaricom is the most profitable Company in East and Central Africa, Safaricom is much much bigger than Stanbic Bank: a typical case of 4 wheels of a car being faster than 2 wheels of a bicycle forgetting the speed of 16 wheels of Roller Skates!, yes factually all this was true, but for the many a first-time Ugandan investors this represented the big deal.
Allow me capture this at a micro level
“A friend of mine called me for coffee, lets call him/her Musoke: we had a talk about Safaricom; Musoke started by telling me how he was going to invest 2,000,000 Uganda shillings and sell when the price tripled to 15 Kshs then pay deposit for the Car Musoke had been eyeing for sometime: With the benefit of hindsight from the last Kenyan IPO (Everready) I had partaken in and was bitten I tried to calm down Musoke’s expectations,
But Musoke would not do the same mistake twice: Gwe Andrew I slept during Stanbic’s IPO, that’s not happening again…..”
From this chat I came up with the Safaricom IPO ‘What If’ Minority Report to guide some of my friends with too high expectations.
To cut the long story short well Musoke was devastated and vowed never to return to this ‘CASINO’ called the Stock Market- I added that he should think of coming as an Investor (long term) and not a 100% Speculator.
On the lighter side if say a friend is arguing with Musoke and they want to win the argument- Just sneak Safaricom talk in the argument, ha ha.
Well the above captures the mood of many a first-time Ugandan share traders’ who if Safaricom had not hurt that bad (and still is) would have shifted their new found market savvy ness to the Uganda Securities Exchange: I hope NIC’s upcoming IPO can heal those wounds as long as it’s done the National Microfinance Bank IPO of Tanzania’s way (give locals preference).

Safaricom has created a lot of suspicion, on the workings of the Stock Market, in the minds of Share Traders’ so either they are selling shares in their Uganda portfolio to avoid a ‘Safaricom’ or they are withholding cash that would be used to buy shares for their Uganda portfolio and most importantly it has handicapped some of the big institutional regional investors who heavily bought out its shares after the IPO.
Therefore owing to Safaricom IPO’s Impact we have Supply exceeding Demand at the Uganda Securities Exchange.
Impact on Market: 2.5 out of 10

Think About It
The basic premise of price movements on the Stock Market or generally in business is the Law of Demand and Supply “The higher the Demand the higher the price, the higher the Supply the lower the price and vice versa”
The above 3 points have tilted the tide in favour of higher supply while at the same time withholding demand.
Any HOPE lies in fact that ordinary shares are the fastest appreciating assets in the world!
With relatively cheap shares and a lot of fear in the Stock Market, may be it’s an excellent time to buy-more like a BUYERS PARADISE and this is much easier said than done.
World renowned investor Warren Buffet, the 2nd wealthiest man in the world, is busy picking up stocks of companies with good promise like General Electric (GE) in the USA; I think it would be wise to follow Warren as regards your home Stock Market with companies like: Stanbic Bank and British American Tobacco Uganda in Kampala and yes Safaricom in Nairobi: Think About that.
All the best to you: Investors and Speculators in these interesting times.

Muhimbise Andrew
+256 702 431064
Star Traders’
Kampala

2008-10-15T13:21:00.000+03:00

THE WORLD FINANCIAL CRISIS
1. As you know, the leading Western economic powers especially America and countries in Western Europe are in the deep of a financial crisis that has far reaching consequences for the whole world. Big merchant banks, insurance companies and associated companies are collapsing every day, literary crumbling like a pack of cards. People who borrow to finance home purchases are unable to pay. There is a growing global credit crunch.
2. The government of Uganda has watched these worrying economic trends, which started with astronomical increases in the prices of fuel and food, with an aloof attitude. Indeed President Museveni celebrated the rise in food prices arguing that Uganda farmers would reap high prices. He did not know that the increase in prices of oil and food would trigger a general rise in the cost of living and lead to the current 14% p.a. inflation. Uganda peasants have yet to benefit from the increase in food prices. Instead they are the victims of high inflation and unbearable cost of living.
3. The financial meltdown in the United States of America and Europe is not accidental or unforeseen. It is the result of their governments' abandonment of basic economic planning and regulation to the altar of a free market. It is capitalism run amock. With the collapse of socialism in the 1990, the promoters of the unregulated market had all the ammunition to push for the removal of any regulation of the excesses of the free market.
4. The result was that what were called Smart Chief Executives in the financial industry resorted to maximizing returns on investment not in production of actual goods but in the manufacture of financial instruments that were traded in primary and secondary markets. A house mortgage by banks, became tradable commercial papers for speculative trading by investment and merchant banks, insurance companies and other smart dealers. With time the layers of transactions, projects and interest based on few physical assets (houses) became unsustainable. The day of reckoning had come.
5. With the liberalization of the Uganda economy, which effectively meant privitisation of state enterprises, retrenchment of public servants leading to massive unemployment and out sourcing of work ordinarily done cheaply by public servants. Uganda joined the free world of smart investors or speculators. The people who have amassed wealth in Yoweri Museveni's regime are not the producers of real wealth but the smart dealers and the corrupt who supply to government and its agencies at exaggerated prices and then speculate in real estate diving prices of land especially in Kampala to levels beyond the reach of the working people. NSSF has joined this property speculation.
6. The working people who have been pushed to the wall, have now been enticed by the basically unregulated banking industry, especially the ever mushrooming micro credit institutions to borrow to acquire homes and several times for ostentations consumption (including lavish weddings) in imitations of the dealers. It is only a question of time when large scale defaults will lead to an unprecedented credit crunch in Uganda. The earlier economic boom under the NRM ended with the collapse of Tefee Bank, Greenland Bank, International Credit Bank, Cooperative Bank, Trust Bank, and the near collapse of Uganda Commercial Bank and Uganda Development Bank.
7. The Uganda Peoples Congress as a social democratic Party firmly believes that the strength of an economy is in the quality and quantity of its production of material goods, the quality and quantity of its work force and how the income derived from such production is distributed. While free enterprise should be encouraged to free up and utilize the competitive energies of all productive people, there must be safeguards and regulations to ensure that competition does not turn into corrupt speculation and exploitation of workers and consumers. This is the thrust of our economic and social philosophy.
8. To day we are seeing the US government feverishly intervening in the market to save America's mortgage, banks and insurance companies from the clutches of Wall Street. This is what the NRM government should be prepared to do to save our peasants and workers from the so called unregulated investors and smart businessmen, read conmen. In May 1969, UPC intervened in the market to save Uganda's interest, the world condemned UPC then and UPC was overthrown with the help of the British government of the day. Today, George Bush and Gordon Brown have realized that nationalization as a government intervention measure is a necessary action in their present circumstances to save the world collapsing economy. UPC has been vindicated.
9. The UPC calls upon the people of Uganda to examine the economic realities of our country and demand a return to proper economic management, away from excessive consumerism and unregulated credit that is bound to lead to economic ruin. Since the NRM government has demonstrated utter inability to change the economic course of this country, the UPC calls upon the people of Uganda to support it in its call for economic reform.
FOR GOD AND MY COUNTRY
CHRIS OPOKA-OKUMU ASSISTANT SECRETARY GENERAL

National Insurance Corporation

2008-09-22T10:00:00.000+03:00

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.

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

2008-09-19T16:38:00.001+03:00

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

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

2008-09-15T14:36:00.001+03:00

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

Bill

Of: Kyabazinga, Split and Rights

2008-09-10T12:24:00.000+03:00

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 9^th 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)

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

2008-09-02T16:26:00.000+03:00

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
Kamonkoli,…
- 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

SAFARICOM IPO: A 'WHAT IF' MINORITY REPORT

2008-09-02T16:17:00.000+03:00

SAFARICOM IPO:
A 'WHAT IF' MINORITY REPORT

FACTS
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

Allocation.
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!

SO, WHAT NEXT?
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: eatrader@gmail.com

Muhimbise Andrew
+256 752 431064
Co-founder
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.