Capital Markets

Nairobi Securities Exchange lists its first oil-linked stock

Kenyan investors on Wednesday got the first ever window to directly participate in the emerging oil, gas and mining industry after Atlas Development & Support Services cross-listed on the Nairobi Securities Exchange (NSE).

Atlas Development, which is listed on the London Stock Exchange (LSE), services major upstream oil companies such as Tullow and Africa Oil through provision of logistics, storage, catering and medical facilities to staff working in remote drilling sites.

Atlas on Wednesday said that its listing would also expose local investors to oil, gas and mining activities in Tanzania, Djibouti, Mozambique and Ethiopia where it operates.

In Kenya, the newly-listed company also services geothermal exploration firms and non-governmental organisations working in remote parts of the country.

The firm has listed 39 million shares on the NSE’s Growth Enterprise Market Segment (GEMS) or 10 per cent of its issued share capital.

The shares were sold solely to local investors through a private placement that raised Sh450 million.

The logistics firm said that there was growing interest among local investors in its stock based on the results of the share offer by private placement.

“The strong interest from Kenyan investors is recognition of the opportunity to create a world class development and support services provider in eastern Africa. We have demonstrated robust financial performance, world class service delivery and regional scale to position Atlas as the best way to gain exposure to this opportunity,” Atlas Development chief executive Carl Esprey said during the launch of the shares on the NSE.

Atlas had said in an earlier statement that it expects to increase revenues this financial year to between $38 million (Sh3.4 billion) and $40 million (Sh3.6 billion) from last year’s $23 million (Sh2.02 billion).

Investors who took part in the private placement were the immediate beneficiaries of the listing following a slight gain in the value of their stockholding.

The November private placement share offer was based on Atlas Development’s Sh11.50 closing price on the LSE’s Alternative Investment Market (AIMS) on November 20.

The share price has since risen to Sh12.30, a seven percentage point increase, giving the firm a market capitalisation of Sh5.5 billion.

On Wednesday, Atlas traded at between Sh13.75 and Sh12. Brokers said they do not expect the stock to make significant swings up or down as is common with newly-listed stocks since the price was already through its trading on the LSE’s AIMS.

“There is really no price discovery since it has been trading on the LSE,” African Alliance Investment Bank chief executive Alistair Gould told the Business Daily.

For the NSE and the Capital Markets Authority, who have been actively pushing to make Kenya an international finance centre, the listing is a confidence boost.

“The cross-listing of Atlas is another major step towards our goal of ensuring that companies that have substantial operations in Africa are accessible to both Kenyan and international investors.

“This cross listing is historic for our exchange and is in line with Vision 2030, which envisions that the growth in Kenya’s natural resources sector will boost our financial institutions,” said NSE acting chief executive Andrew Wachira.

Atlas Development’s listing also adds variety to the GEMS, which has been very active in the past three months.

Atlas Development becomes the third company to list on the GEMs this year after Flame Tree Group and Kurwitu Holdings.

Real estate firm Home Afrika was the first firm to list on the GEMS in 2013. East African Data Handlers and Empire Microsystems are the other companies that have announced plans to list on the GEMS by the end of the year.

Atlas Development’s listing on the GEMS was handled by Burbidge Capital, which also handled Flame Tree Group’s debut on the bourse in October. The company has braved fears that the falling oil prices will reduce exploration activity across the world.

Atlas Development said that work, especially on onshore drilling, is expected to go uninhibited while geothermal exploration, another area where the logistics firm has interests is picking up.

Prior to the private placement announcement Atlas completed the buyout of Ardan Logistics Kenya in November, which was later rebranded as Atlas Development for an undisclosed amount.