For only the first opening one minute of trading at the Uganda?Securities Exchange (USE), does the atmosphere and noise made?by stock brokers, offer the feeling of an active stock market.?What happens after the one minute opening? For the next two?hours, trading is a series of a few trading deals often about once?an hour.?More significantly is the fact that by close of trading, some few?brokers have either given up or are not optimistic about any?other deals. They just seem to be hanging around, waiting for the?closing bell to ring.
Over the last three years, the index of all locally listed companies?has mostly been in the red, due to limited activity on the USE.
USE CEO Joseph Kitamirike
Once in a while the index will casually tip the green, riding on the?good performance of Uganda Clays?(UCL), Stanbic Bank (SBU) and?Bank of Baroda (BOBU) counters.?Notably, trading between January?and June 2012 has generated?about Ushs9.8bn compared to?Ushs14.9bn in the final half of?2011 and Ushs25bn in the first six?months of 2011.?Despite this slump, there are?investors who are swooping on?some shares and others who are?letting go.
With the loud silence?that beckons at the bourse, for?some investors this is probably the?best time to buy.?Question is, where do you put your money and why???Banking stocks (particularly Baroda and Stanbic) are looking?cheap and are always good stocks to buy for the medium to long?term investor,? Keith Kalyegira, the chief executive officer of First?Renaissance, an investment advisory firm, said.
?The challenge seems to be supply of securities ?those who have?stocks are not selling which is bound to put upward pressure on?prices in the short term.??Late last month, Stanbic Bank Uganda started trading at Ushs25?after bonus shares finally made their way to the trading floor.?Investors in Uganda?s largest bank were given 4 shares for 1 which?saw the price drop from Ushs110 to Ushs25.?Research analysts on the exchange point out that for a bank that?posted a profit of Ushs121bn last year, a lower price will attract?more demand.
The price is expected to at least peak at Ushs50 by?next year.?However like Kalyegira says, market analysts take note of the?limited supply of the SBU shares. ?Demand is up because of the?low share price, but supply remains low due to hesitation by?some investors,? says Kalyegira.?Bank of Baroda Uganda (BOBU) is currently trading at between?Ushs190 and Ushs200, making its shares the second lowest?priced of all the listed banks on the exchange.?After posting a profit of Ushs26.7bn in 2011, the bank is?considered to have an attractive price for new buyers; however?there is noticeable limited supply of shares on this counter.??For the medium term investor, banks are the best option?considering that they are too cheap to buy at the moment,??Arthur Nsiko, a research analyst at African Alliance says.
He however predicts that the banking sector?s performance in?2012 will not be as good this year?as the tight monetary policy stance?Bank of Uganda has employed to?reign in high inflation over the last?12 months takes its effects.?British American Tobacco (BATU)?saw a profit surge of 22 percent?at the end of last year after a?reported net profit of Ushs22bn.?Investors received Ushs450 per?share, the highest dividend payout?by the company.??For an investor looking for quick?cash flow, this is the best option?because of its high dividends of?all the locally listed companies,? African Alliances? Nsiko says,??The challenge though is that there is limited liquidity on the BAT?counter.??The pick for the long term investor has been considered to be?Uganda Clays, since it is recovering from a huge debt burden of?about Ushs12bn.
Uganda Clays has had the lowest price per share for the last three?years. Currently trading between Ushs35 and Ushs40, the clay?products maker has always managed to trade actively mainly?because of the low price.?Investors in the company have not seen a dividend for the last?five years due to losses arising from huge debt obligations. At the?end of last year, the company reported a profit of Ushs604m but?once again no dividend was recommended.??It is for long term investors since real estate is still a growing?sector. UCL is currently recovering from the debt obligations and?doing better than it did in 2009 and 2010,? Nsiko notes.
National Insurance Corporation (NIC), the last company to do?an IPO has suffered from unresolved issues with Makerere?University over claims of about Ushs15bn and its suspension from?the bourse over the delayed release of their financials in 2011,?dumped investor confidence.?Investors bought shares at Ushs45 (IPO price), and by May 2011,?the price was between Ushs65 and Ushs70.?However, the uncertainty that followed has dragged the price?down to Ushs40. Despite the company posting profits of?Ushs12.89bn in 2011, the price has kept between UShs35 and?Ushs45.??Whoever is looking at the long term can also consider NIC. Its?share price is likely to remain in the range of Ushs35 to Ushs45,??says Robert Katabaire, a research analyst from Dyer and Blair?Investment Bank Uganda.
?The question is whether the demand on this counter can be?sustained, to drive the price upwards,? he adds.?Trading at Ushs620, the New Vision Company Limited (NVL)?has had price stability on the exchange. At the end of 2011,?the company posted profits of Ushs1.7bn and demand on this?counter has been subdued for the second quarter of 2012.??The New Vision Group is profitable having allocated a dividend?of between Ushs16 and Ushs15 per share,? he notes ?however?this amount may not be that significant for an investor, so this?looks like more of a long term investment,? Katabaire points out.??Its share price is also likely to decline even to at least Ushs400?before rebounding again to a high of Ushs1000 if last year?s?trends are to be followed.?
Market analysts from various brokerage firms admit that there is?a slowdown in trade, and this ultimately causes financial stress.??Liquidity on this market is very challenging,? notes one from?Baroda Capital Markets, however, ?the corporate action like we?have seen from Stanbic Bank (the bonus issue) will keep the?market active,? Nsiko from African Alliance adds.?Market analysts also signal tough times ahead unless the?regulator is able to bring on another IPO. Uganda?s last IPO was?NIC in 2010 and last year, investor confidence in the insurer was?dampened heavily after it was suspended from the market for?failure to comply with trading rules.
In essence, two IPOs have been in the works if conversation heard?in the corridors of the USE are to be believed, but nothing has?been confirmed yet.?The UMEME IPO is hugely anticipated, however with the tightlipped?sources at the USE, the Capital Markets Authority (CMA)?and Actis (Umeme?s shareholders), the wait is on for the share?price and number of shares to be floated.?Other expected IPOs whose ?dates are yet to be confirmed are Crane?Bank and Tullow Oil.?Without the market rebounding fast enough, Uganda?s fourteen?year old stock exchange still has a long way to go before it?transforms into what it is meant to be.
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