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Capital Markets

Umeme listing at NSE a first for non-Kenyan firm

Investors buy the shares during the Umeme initial public offering in Kampala, which closed on November 7, 2012. The share begins trading at the Nairobi Securities Exchange Friday after the Capital Markets Authority approved its cross-listing. Photo/File
Investors buy the shares during the Umeme initial public offering in Kampala, which closed on November 7, 2012. The share begins trading at the Nairobi Securities Exchange Friday after the Capital Markets Authority approved its cross-listing. Photo/File  umeme ipo, nairobi securities exchange

Uganda power distributor Umeme’s share is expected to start trading Friday at the Nairobi Securities Exchange (NSE) at between Sh9 and Sh9.50, making it the 61st company to list on the bourse.

Umeme was listed at the Uganda Securities Exchange (USE) on November 30. Its share has been trading at between Sh9 (Ush275), the initial public offering (IPO) price and Sh9.81 (Ush300).

“The opening price of the share on the NSE on the first day of trading will be the (Kenya shilling) equivalent of the closing price of the share on the previous trading day on the USE,” notes the revised information memorandum for the offer released Thursday. “The conversion rate that will be used is the Central Bank of Kenya’s Uganda shilling selling rate at 8:30am on the first day of trading.”

The Capital Markets Authority (CMA) — authorised the listing of the power distributor’s shares Thursday on the Nairobi bourse, a move that would make the company the first in the region to cross-list on the NSE.

Umeme will be the first to break the cycle of companies whose primary listing is in Nairobi, but have been cross-listed in other markets.

Although prospects of how a company is expected to perform in the future do affect price changes of cross-listed shares in secondary markets, these stocks rarely trade in the secondary market because of the small number available for trading.

“It all depends on how many shares will be available. Fundamentals feed into it but the biggest problem is that these shares will need to be transferred to a central depository account (in Kenya),” said Francis Mwangi, a research analyst at Standard Investment Bank.

He, however, said that Umeme has higher electricity leakages on its grid than its counterpart Kenya Power, which could influence investors’ view of the stock. Umeme reported a total asset base of Ush559 billion and a net profit of Ush23 billion as at December 2011. It has announced a dividend payment policy of 50 per cent of its net profit.

East African Breweries Limited (EABL), Equity Bank, Jubilee Insurance, Kenya Airways, KCB, NIC Bank and Nation Media Group (NMG) have cross-listed their shares at the USE.

EABL, Jubilee, KCB, and NMG are cross-listed at the Dar es Salaam Stock Exchange while KCB and NMG are cross-listed at the Rwanda Stock Exchange.

A number of other firms whose primary market is Kenya including Centum and Uchumi have also indicated their intention to cross-list, a move that increases the visibility of their brands in those countries.

“It augurs well for the integration of the capital markets. All the cross-listings in the region have their primary listings in Kenya so we are delighted to host a company whose primary listing is the USE,” said NSE chief executive Peter Mwangi.

During the Umeme IPO, which opened on September 20, 622.37 million shares comprising 272.37 million subscription shares issued by the power distributor and 350 million sale shares issued by Umeme Holdings, which is owned by London based private equity fund Actis, were sold.

The IPO, which was oversubscribed by 36.9 per cent with the highest interest coming from institutional investors, increased the number of shareholders of Umeme to 6,471 from seven.

“Since we have had a positive response in Uganda, I think it will be positively received in Kenya. It is the first cross-listing from the region and the NSE has more liquidity,” said Ken Kitariko, managing director of African Alliance Investment Bank Uganda.

The CMA said Thursday that it had approved the listing of the firm after a review of its information memorandum and was satisfied it had disclosed all material information in accordance with the law.

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