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Capital Markets

Three firms to list on NSE's growth segment by end year

NSE chairman Eddy Njoroge (centre) and Flame
NSE chairman Eddy Njoroge (centre) and Flame Tree Group CEO Heril Bangera look on as FTG chairman George Theobald (left) hits the gong during the listing of the firm on GEMS on November 6, 2014. PHOTO | DIANA NGILA |  NATION MEDIA GROUP

Nairobi Securities Exchange (NSE) is looking to list three more companies in the small cap segment by the end of next month, bringing the total to five.

Chairman Eddy Njoroge Thursday said that more firms were seeking listing at the Growth and Enterprise Market Segment (Gems) on achieving the required corporate governance.

“There are three more after Flame Tree in the pipeline before the end of the year. Next year there will be a lot more coming on board. In terms of sectors, we have a combination, one being in FMCG (fast moving consumer goods)and another one in real estate,” he said on the sidelines of the ceremony.

“When some are preparing to come to Gems, they are sometimes too far behind in terms of governance, proper structures and board and we have to bring them up to speed. That is what takes time, but a number of them are now preparing to list.”

The main market has seen only one listing this year — the NSE self-listing— but according to Mr Njoroge the exchange is now aggressively marketing listings, targeting to increase the number of listed firms from 62 to 100.

Family owned firms have shied away from listing to avoid losing control to external shareholders. “What we are saying is that these people may not lose control despite going public, but they will have to manage the company as a public company,” said Mr Njoroge.

Sharia investment firm Kurwitu Ventures announced on Tuesday it had received approval to list on November 13. Mr Njoroge said the others will be announced in due course.

Atlas Development and Support Services, a logistics firm serving the oil sector, has announced plans to list by the end of the year.

Flame Tree’s listing is the second on GEMS after that of Home Afrika. On listing at Sh8, its share jumped to Sh13 on the first trade, before appreciating further to Sh14 by close of trading. (SEE VIDEO)

Flame Tree has 162 million listed shares and at Thursday’s trading price the company was valued at Sh2.27 billion, representing a first day gain of 75 per cent in value.

Solid brand portfolio

In a coverage note on the company ahead of the listing, Burbidge Capital noted its solid brand portfolio allows it to defend market share while a diversified product range and competitive pricing stood it in good stead.

In terms of risk, Burbidge pointed out that volatility in commodity plastics prices may constrain gross margins. The firm was likely to be burdened by high operation costs in the medium-term driven by continued investments in the distribution network.

According to disclosures on the listing documents, Flame Tree had a gross turnover of Sh1.6 billion in 2013, with turnover in the half year to June 2014 standing at Sh778.5 million.

Net earnings for 2013 stood at Sh149 million and for the half year to June 2014 at Sh78.3 million.

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