UAP market value hits Sh13bn after over-counter listing
UAP Holdings managing director James Muguiyi (left) and Finance permanent secretary Joseph Kinyua during the launch of UAP public offering. Photo/File
What you need to know:
UAP Holdings listed on the OTC market six weeks ago, and has since recorded trades of between Sh65 per share and Sh62 per share.
UAP’s last trading price of Sh62 values the group at Sh13.1 billion.
Market analysts, however, cautioned that the OTC market is a less reliable price indicator compared to the stock exchange.
Trading of UAP Holdings shares on the over-the-counter market has valued the group at Sh13 billion, making it potentially Kenya’s biggest insurer based on market capitalisation.
UAP listed on the OTC market six weeks ago, and has since recorded trades of between Sh65 per share and Sh62 per share, up from last year’s public offer price of Sh60.
With 211 million issued shares, UAP’s last trading price of Sh62 values the group at Sh13.1 billion, but market analysts cautioned that the OTC market is a less reliable price indicator compared to the stock exchange and should not be used to form a straight comparison of valuations.
“Ideally OTC listed stocks are supposed to trade at a discount of the price in a formal exchange, but in Kenya it is difficult because sometimes investors are willing to pay a premium just to acquire shares,” said Johnson Nderi, a research analyst Suntra Investment Bank.
About 8,500 UAP shares were traded at Sh65, an eight per cent increase from the Sh60 offer price. Another 1,000 shares were later traded at Sh62 each.
Trading at the OTC market takes up to three weeks to conclude due to mismatches between buyers and sellers and also the fact that it is a manual process.
Britam, which is listed on the Nairobi Securities Exchange (NSE), has the highest market capitalisation of Sh12.86 billion, followed by Jubilee at Sh10.1 billion and CIC Insurance at Sh8.8 billion.
Analysts said at best the OTC only gives an indicative not a definitive valuation due to different factors at play compared to an open stock market.
The high number of participants at the stock market and high liquidity makes price discovery more efficient. NIC Securities business development manager Samuel Gichohi said low liquidity, price bargaining and low trade turn-around time make OTC markets less efficient.
“OTC valuation is therefore not realistic,” said Mr Gichohi.
UAP’s listing on the OTC market will, however, help in its preliminary valuation ahead of a planned listing at the NSE expected towards the second half of 2014.
“The purpose of the OTC market is to provide liquidity for UAP shares prior listing on the NSE in the next 12 to 18 months,” said a valuation update note by Genghis Capital, which is managing UAP’s trading together with CFC Stanbic Financial Services.
UAP listed its shares on the OTC market on January 5 after a share sale that opened on November 14 and closed on December 5 2012. The share sale raised Sh750 million through a limited public offer that was over-subscribed by 30 per cent, attracting 951 new investors who applied for shares worth Sh971.9 million. On offer were 12.5 million shares.
Prior to the public offer, UAP managed to get Sh4.6 billion through private equity funds Aureos, Swedfund and AfricInvest in the form of loans that are convertible to ordinary shares.
The private equity funds have a combined stake of 37.3 per cent. Other large shareholders are Bawan Limited with a 20.34 per cent stake, Chris Kirubi (9.58 per cent) and J.N Muguiyi with a 5.97 per cent stake.
UAP has earmarked Sh1.8 billion for the expansion of its existing insurance and financial services businesses and Sh300 million for the group’s re-organisation.
Another Sh2.15 billion has been earmarked for property investments while Sh1.066 billion has been budgeted for increasing the group’s financial assets.
Kenya’s 45 insurers have managed to penetrate the market at 3.02 per cent, as at the end of 2011, which is less than a third that of countries such as South Africa whose penetration is at 11.6 per cent.
Analysts say that this gap presents opportunities for the companies to earn more premiums.
“This then offers a huge potential especially growth of the middle class new innovation like banc assurance, micro insurance and mobile insurance likely to gradually take root,” says an insurance report by Sterling Capital.
