Uganda Stock Exchange Annual Results Special

Its been the results reporting season in Uganda and I took some time to obtain and review the financial results for 5 of the companies listed on the Uganda Stock Exchange (USE). Not the easiest process though we did get there in the end.

My only wish if for the Uganda Stock Exchange to post the financial results of each listed entity in their entirety as lots of information that is important to investors is lost or hoarded. Case in point, one has to look at the announcement provided by the USE for BATU results. (See http://www.use.or.ug/inner.php?cat=news&sid=306).

STANBIC BANK UGANDA LIMITED (SBUL)
Date of release : March 2009
· Customer deposits have increased by 20% to UGX.1,289,674B (2007 = UGX.1,072,857B)
· Loans and advances also increased by 6% to UGX.108,722B (2007 = UGX102,335B)
· Profit after tax at UGX.78,550B rose by 48% (2007 = UGX 53,017BN)
· Earnings per share up by 48% and growth in shareholders funds by 40%.
· A Dividend pay out of UGX.5.86 per share (2007 = UGX 6.64 per share).

The key question for Stanbic was really why the dividend was reduced by 20% despite the 45% increase in Earnings per share. The MD suggested this was a precautionary measure which would possibly be re-reviewed at interim to assess the impact of the credit crunch on the Ugandan Banking landscape. There should be an interim dividend declared by Stanbic soon. Lets get ready to rumble.

Investor information quality

+ Excellent with respect to shareholder communications. For more o this, see Bankelele’s post here (http://bankelele.blogspot.com/2009/04/ugandan-envy.html)

DFCU LIMITED (DFCU)
Date of release : March 15 2009
· Customer deposits have increased by 56.45% to UGX.254.7B (2007 = UGX.163B)
· Loans and advances also increased by 23.19% to UGX.282.8B (2007 = UGX 229.5B)
· Profit after tax at UGX.13.1B rose by 54.17% (2007 = UGX 8.52BN)
· Earnings per share up by 49% and growth in shareholders funds by 19%.
· A Dividend pay out of UGX.21.13 per share (2007 = UGX 13.09 per share).
· Cost to Income ratio down by 20.55% from 73% to 58%

Investor information quality

+ Investor information section on the group’s website provides the required information. However should consider taking the Stanbic Uganda approach of email communication with shareholders

- Unlike in prior year’s the company did not post annual reports and relevant proxy forms. Wonder whether this had something to do with cost cutting?

BANK OF BARODA UGANDA LIMITED (BOBU)
Date of release : April 27 2009
· Customer deposits have increased by 23.43% to UGX.214,132M (2007 = UGX.173,477M)
· Loans and advances also increased by 31.03% to UGX.112,715M (2007 = UGX. 86,022M)
· Profit after tax increased by 24.73% to UGX.13,474M and earnings per share grew by 24.73%.
· A Dividend pay out of UGX.8.00 per share (2007 = UGX 7 per share)

Investor information

- No positives to report in this respect for this company.

- I find it difficult to understand this bank’s reporting. The outgoing MD KK Shukla provided unaudited figures for the bank’s performance as early as January 2009 to all the local press in separate interviews.

- Companies that release their results on the last day allowed by the Capital Markets Authority are always fishy. There is always lots of haggling, adjustments, changes and errors that are being exchanged between the auditors and management and ultimately the financial statements are always a product of forced consensus by both the auditors and management to avoid breach of CMA reporting rules. My advice: STAY AWAY FROM THEM UNTIL THEY GET THEIR ACT TOGETHER. The financial year ends on 31 December 2008 for goodness sake. You do not need 4 months to complete an external audit.


- BOBU has no website. Local investors are always referred to the Baroda India (parent company) website is irrelevant for investors on the Uganda Stock Exchange. Infact there is hardly any mention of Bank of Baroda Uganda on that website. I guess this is the same with all of those big banks Barclays, Standard Chartered etc Management should style up with respect to this.

BAT UUGANDA LIMITED (BATU)
Date of release : April 15 2009

· Sales have increased by 16% to UGX.185,865M (2007 = UGX.184,555M)
· Profit after tax decreased by 2% to UGX.3,244M (2007 = 6,140M).
· No dividend payout declared.
· EPS decreased by 11% from UGX125 to UGX 66.
· Total equity increased by 57% to UGX600M (2007=UGX -2,291M)
· Current liabilities increased by 80% to UGX 112,213M (2007 = UGX 90,841M)

Current PE is approximately 5 which is high given the recurring losses that BATU has been making over the year. It is worth noting that current year profitability was materially affected by foreign exchange fluctuations i.e appreciation of the dollar relative to the U shilling resulting in over UGX10bn worth of exchange losses. I would have liked to question the FD about the possibility of hedging but I won’t attend the AGM.

Investor information quality

+ BATU is the only USE listed company which provides minutes of the previous annual general meeting as part of the annual report pack sent to shareholders before the meeting which I feel is a big plus especially if one did not attend the prior AGM.

- Between last year’s (2007) and this year’s (2008) annual report, the company MD Serhat Eroglu, who we felt had done a great job somehow left the company. A new MD Ricardo Fonseca joined the company. However there is no mention of when Serhat Eroglu left and why throughout the entire annual report....Not even in the Corporate Information, Chairman’s report....NADA. Is this a slip????? So I ask myself whether he was fired, promoted, transferred. Not even in the local press was anything been mentioned over this.

- The BATU website is CRAP. This appears as www.batuganda.com on the back cover of the annual report. Management should style up with respect to this.


UGANDA CLAYS LIMITED (UCL)
Date of release : April 30 2009

The main business is the production and sale of building clay products in housing and construction, including; roofing tiles, bricks, blocks, decorative gilles, ventilators, floor tiles, pipes and cable covers.

UCL released an interesting set of results for the financial year ending 31 December 2008
· Sales have increased by 16% to UGX.13,548M (2007 = UGX.11,699M)
· Profit after tax increased by 2% to UGX.2,152M (2007 = 2,108M).
· No dividend payout declared.
· EPS decreased by 11% from UGX3.05 to UGX 2.7.
· Non current liabilities increased by 57% to UGX2.,351M (2007=UGX 12,993M)
· Net Current liabilities decreased by 80% to UGX 2,166M (2007 = UGX 10,657M)

Current PE is way in excess of 45 and I’m still reluctant to delve into this company.

It is clear that financing costs and loan repayments for the massive debt issued to fund the construction of a new factory in Kamonkoli have taken their toll on a once debt free company. While the debt itself is not bad, it remains to be seen if the debt has been put to good use . Only time will tell.

Investor information quality

+ Uganda Clays advised its shareholders that; Annual reports and audited financial statements would be posted to the shareholders on or before 30 June 2009 together with notice of the Annual general meeting to be held on Friday 24 July 2009 at Kamonkoli Mbale at 11.00am. This is a good chance for current shareholders to have a look around the new factory which is responsible for introducing mammoth levels of debt to the balance sheet of a once pristine company and gem in the formerly unknown rough of the Uganda Stock Exchange. I suppose such efforts are to be commended.

- However, the company needs to understand that only a few shareholders have the ability to travel from Kampala (or Entebbe for that matter- where the head offices of the company are situate – in the name of attending an annual general meeting.

- Naturally, the shareholders of the company, given the nascent stage of the bourse, will be grumbling about the lack of a dividend especially given that Uganda Clays has traditionally been one of the companies with the highest dividend yield 9before the splits and rights issues). In my view an AGM 5 districts away is a recipe for disaster but I will endeavour to attend if only to make heads or tail out of it.

- As an investor, I still have a problem with the company’s website. There is no investor information for the website. Someone needs to raise this at the AGM.

- Companies that release their results on the last day allowed by the Capital Markets Authority are always fishy. There is always lots of haggling, adjustments, changes and errors that are being exchanged between the auditors and management and the financial statements are always a product of forced consensus by both the auditors and management to avoid breach of CMA reporting rules. My advice: STAY AWAY FROM THEM UNTIL THEY GET THEIR ACT TOGETHER. The financial year ends on 31 December 2008 for goodness sake. You do not need 4 months to complete an external audit.


Elsewhere, I have now given up hope of participating in the NIC IPO (if it ever happens of course). I have negative affinity for melodrama associated with listings especially since Safaricom debacle. Investors end up paying top dollar for mediocre companies and valuations are never reasonable due to lots of hype.

Also Reuters reported that Uganda expects to sell its 49 percent stake in Kinyara Sugar Works in two years time, its 40 percent stake in the National Insurance Corporation (NIC) this year, its 31 percent in Uganda Telecom (UTL) in three to four years and its majority stake in the Sheraton Hotel within four years.

Diamonds in the rough

It is official, 2 highly watched Kenyan banks are due to cross list on the Uganda Stock Exchange and several investors are wondering what the effect of this cross listing will be on their investments.

We do know that the cross-listing process will provide more sources of capital for KCB – hopefully even cheaper and will also play a part in improving knowledge of the 2 banks amongst investors.

In my experience, stock brokers in Uganda are reluctant to deal Kenyan stocks because of the associated exchange differences and the need to assure their clients that nothing fishy went. Usually they prefer that Ugandan clients deal with their forex differences and place their orders in Kenya Shillings which of course doesn't appeal to them.

Case in point are the already cross-listed stocks currently on the USE. Jubilee (JHL), East African Breweries Limited(EABL) and Kenya Airways Limited(KQ) are stocks to reckon with which have been delivering value for quite sometime now. (Don’t tell me that KQ has taken a pummelling recently).

See http://www.use.or.ug/inner.php?cat=trdstat&subcat=mktinfo

On the basis of the above, I would not foresee any significant changes in the banks share price at least in the short run. In as far as the key obstacle, which lies in the fact that the USE is not automated (still paper based), it will take sometime to realise any impact of the cross-listing.

There is also the problem of timing difference as the trades take some time to execute resulting in significant price losses/gains during the execution period. And after all the hullabaloo surrounding Safaricom, only the serious few like myself are really into this kind of thing.

Elsewhere, word has it that Uganda Clays shareholders have okayed a split which will reduce the share price from the current Ushs10,160 or whatever it shall be when the split is effected by Ushs100. Now as you may already know, this stock has been my secret gem in Uganda. I believe this is the best split yet.

Main Menu: Diamonds in the rough
Meanwhile, while snooping through Kenya, some gems appear to exist which are free riding into value territory while every one is focusing on Equity Bank and Safaricom Ltd.

BAT Kenya Limited and Total Kenya Ltd just unleashed brilliant results for the half year ended 30 June 2008. You’ll ask me, what’s so good about that?

I particularly love BAT Kenya because it is so in line with my core concept of value investing. Of course this one is not for you ethical investors. Don’t crucify me as at the moment, I do not own any shares in BAT Kenya. This may change any time.

Kenya recently implemented two changes which the naysayers will tell you should really do damage to BAT Kenya’s bottom line and ultimately their ability to deliver value in the long term.
Kenya recently introduced hybrid taxation in his 2008/09 budget, which they said was intended to improve the fairness of the taxation system. On top of this, one would ideally expect the ban on public smoking to also take effect. Additionally, there’s the line about illicit trading and smuggling of cigarettes.

It is generally well known that

i) the government can not do without the Ksh4,000M that BAT pays in taxes (both income and excise)
ii) the public smoking ban has been tried and tested in neighbouring Uganda and even the United Kingdom with interesting results.
iii) The market reacts and adapts to such legislation and other occurrences. After all, smoking is an addictive luxury. (Yes I said luxury). Or should it be utility???
iv) The biggest obstacle, in Africa, will naturally be the will to implement.

I do not intend to reproduce the numbers as these are already available in the public domain but suffice it to say that BAT is a stock that keeps on delivering value year on year and as with the key tenets of value investing, cash-flows and particularly dividends never lie. Honestly speaking, what’s wrong with this cash flow statement especially given that we all know equity markets are taking a beating the world over? PS focus on that cash flow statement.

http://www.nse.co.ke/newsite/pdf/Announcement%202008/BAT%20Half%20Year%202008.pdf

Yes operations generated less cash than we would expect.

We must note with respect to BAT Kenya, that the dividend yield is not necessarily based on special events or payouts. As a result, there is every expectation that the company will keep up on its dividend payments

As I have always believed and blogged. stocks which provide a high dividend yield will almost always provide a lot more value (in the long run of course) in comparison to other stocks and even the entire market.

Various investors in search of value without the same degree of volatility associated with growth stocks. BAT Kenya has consistently provided an income of 8% or more plus capital appreciation.
And the icing on the cake is that the company has positive earnings growth and the volatility/risk associated with certain stocks especially on the NSE is avoided.

I definitely expect BAT Kenya to keep on improving on these dividends in order to maintain the yield as the share price increases.

As for TOTAL Kenya Ltd, I’ll let the numbers do the talking:

Share price: Ksh 30 - Ksh 33 (rounded)
PE Ratio: 10
EPS: 3
DPS: 2.5
Yield: 8%

Again, the naysayers go on and on about inability to pass on the increases in the oil price to consumers. However I say that this applies to the entire oligopolistic market. Someone somewhere in the industry has got to rise above the rest. I believe this will be TOTAL simply because they have demonstrated over the years, that management have what it takes to keep on delivering value over the years through managing inventory, transportation and keeping financing costs to a minimum. Otherwise, the sustainability of these sumptuous dividend payments would not be possible.

Wish list
i) If only Uganda’s parliament would pass the electronic trading bill, relevant parties sign the dotted line and electronic trading is realised in East Africa
ii) Dare Salaam financial markets were liberalised and foreign exchange controls relaxed


New Vision Rights Issue: How to Participate.
Shareholders: To participate in the Rights Issue, you will need to fill out a Provisional Allotment form and together with the payment (to be made to Standard Chartered Bank Uganda– the Receiving Bank) send your form to an authorized broker.

New Investors: Rights are currently trading on the USE at Ush500 ($0.25)
In both cases, do contact a broker of your choice to help you with the whole transaction. (page 80 of the Investors Memorandum has a list of all the authorized brokers).
For more info, please see:http://www.enteruganda.com/brochures/nvrightsissue.html

DISCLAIMER: This blog does not constitute investment advice. Though utmost care has been taken while preparing this blog, I do not accept liability for investment decisions made as a result of this blog

Value unearthed in UGANDA

This fortnight I stormed the Pearl of Africa in search of value and I believe a gem has been unearthed. I will look at this gem later. First the surprises.

Well, well,well, what do you you know?? My most well kept secret on the Uganda Securities Exchange, Uganda Clays Limited has set up a website(www.ugandaclays.co.ug). Isn't that promising?????? I know what you are thinking! ......so what???? We who have always believed that knowledge is power to the value investor have reason to believe that this represents a major development in terms of the company's investor services. The only problem at the moment is the fact that while the website commendably showcases the company's products, there is no section for INVESTORS YET. As a result, we are unable to review its performance over the years. I'm sure management will say that this is what the website was meant to do. I beg to differ in the current business environment where stakeholders directly affect the fortunes of the business. But hey, I am willing to live with this one little step taken at a time. Hopefully, this will be looked into.

Interesting news from BOBU's AGM/annual report. Shareholders have been asked to consider and approve the splitting of shares, which currently have a face value of UGX100 per share to UGX10 per share during the AGM on 2 June 2008. This might do wonders for the share with respect to affordability. But given the current shareholding structure, I highly doubt that this will do much to improve the liquidity of the share. As I blog, it is trading at UGX4,000. By the time the split is put into effect, moreover the share may have doubled, for what its worth.

On a serious note though, why does BOBU not have an investors website if only to avail the relevant shareholder information to shareholders for just a couple of daysURGHHHHHHHHH.
Companies on the USE should pick a leaf from Stanbic Bank Uganda which has availed the relevant information (Check out www.stanbicbank.co.ug). Thumbs up for Stanbic Bank Uganda for another first in Uganda after the distribution of annual reports to shareholders by email. I reassert that Investor services are key to a company's image. I will demonstrate this in future blogs.

Well, now we know that Safaricom is for tomorrow with refunds of up to Ksh129BN as per Business Daily Africa. Isn't that a downer for retail investors???? Given that the bulk of this will ultimately end up on the Nairobi Stock Exchange (NSE), this has got me thinking about how this will impact the current shares. One thing is for sure, as I mentioned earlier blog, the level of speculation and technicians on the NSE, would suggest that there will be high demand for the low priced shares (low price being in absolute terms). As a result, shares like Mumias Sugar, Centum, and (for investors with some gall, agriculture stocks) will see some upward movements I believe.


NOW 4 THE MAIN MENU
We now know that Crane Bank's IPO is due in September 2008. Looking through their financial statements, its interesting to contrast them with Bank of Baroda (the already listed bank). Now if you thought BOBU was a value investment, take a look at Crane Bank Limited's accounts for the year ended 31 December 2007. The bank's report card paints a really rosy picture (going by the numbers).
Profit Before Tax increased 62.6% from UGX15.4BN to UGX25BN in 2007.
Profit After Tax increased from UGX12.5BN to UGX18.8BN.
Dividend of UGX4BN were declared
Loan loss provisions had a marginal increase from UGX1.7BN to UGX1.9BN (6.98%)
The increase in loan loss provisions did not worry me however given that the bank's advances also increased by a whopping 22% from UGX118BN to UGX144BN.
Customer deposits also increased by 68% to UGX290BN from UGX172BN.

The bank currently has issued and fully paid capital of 34BN shares out of an authorised capital of 50BN shares. The par value is UGX1.

Now for other tidbits worth mentioning;
The bank's auditors are Deloitte though 2007 was their last year. (No disrespect but big 4 audit firms are a plus for me regardless of how shoddy their work may be occasionally).

Managament and Directors have been with the bank for sometime (3 to 4 years at least). With Sudhir Ruparelia as vice chairman. I personally know them to be hands on especially when it comes to customer service.

One minor glitch however is the goodwill carried on the balance sheet which presumably arose from the acquisition of Stanhope Finance Company Limited in 2006. That the directors still consider this worth UGX690M unimpaired (as in 2006) is something I would have wanted explanation for. I still do not believe this would be unchanged. But hey, if the auditors are happy...........................

SO the big question is whether it is a gem

From the above, the key numbers are as follows:
Earnings (PAT) - UGX18,754,195,000
Shares - 34,000,000,000
EPS - 0.53

I would estimate the historical net asset value per share (NAV) based on its December 2007 balance sheet of the bank to fall within the range of UGX5 to UGX7 give or take.

Note ( I am not entirely convinced by the goodwill as explained above hence I have adjusted the PAT/Earnings for it)
Doing the maths, the PE ratio is not bad at all. Not bad at all and I would say this is a gem. So all we have to do is wait.

Next week we'll raid one more market in SubSaharan Africa in search of value....

DISCLAIMER: This blog does not constitute investment advice. Though utmost care has been taken while preparing this blog, I do not accept liability for investment decisions made as a result of this blog.

The search for value continues further south

We ultimately got done with the IPO of the most profitable company in East Africa (Safaricom Ltd offered at Kshs5 per share). As the dust settles, it appears that the institutional investors will have to part with Kshs5.5 as the book building price advised by Morgan Stanley- the book runner.

A few of my colleagues have decried the 20% premium being paid by the institutional holders nothing more than a give away of Kenya's pearl by the government. The argument is that since the local investors oversubscribed their allocation by between 250% - 350%, why not sell the company to them?????Yeah right!!!!If only patriotism was the catalyst for the growth of our nascent capital markets.

My take on this is that the price being offered to institutional holders will play a crucial role in maintaining constant/regular demand for the shares in the post IPO period. If only folks could understand that speculation does not a market create. As a staunch believer in fundamentals, I believe this is good for the market since we will ultimately see the value of the share as a result off this demand. Watch this space for the allocation results due on 31 May or thereabouts.

Out goes Safaricom, in comes an even bigger fish to fry. Celtel Zambia Plc is ours for the taking. The offer opened on 30 April 2008 and closes on 20 May 2008 with the anticipated listing date/commencement of trading on the Lusaka Stock Exchange slated for 11 June 2008. An extract from the LUSE website reads as follows: 'Celtel Zambia shall list 5,200,000,000 ordinary shares of ZMK0.20 par value on the LuSE, which will be deposited in the Central Shares Depository of the LuSE. Celtel International B. V., Celtel Zambia's parent Company, has provided an offer for sale of 1,040,000,000 ordinary shares in Celtel Zambia Plc at an offer price per share to be communicated to the public before the offer opens and all the necessary regulatory approvals have been granted. This represents 20% of the share capital in Celtel Zambia. The shares will be offered to the Zambian public, Zambian Institutional Investors, employees of Celtel Zambia and International Institutional Investors.)

According the press reports, it is the biggest telecoms company in Zambia, let alone Sub Saharan Africa (excluding South Africa). The company's EPS 31/12/2007 was 40Kwacha. The offer price of K640 is not so taxing given the company's results. The only problem is that the offer is restricted to Zambians and institutional holders. moreover the prospectus omits some key information such how oversubscription will be dealt with. For institutional holders, this is a buy of course since trend analysis seem to suggest that one can not go wrong with IPOs in sub Saharan Africa.

Elsewhere, The Nairobi bourse has been undergoing a decline as investor activity settles in anticipation of the Safaricom refunds. One would rationally expect the activity to pick up once these refunds are done with. As a result, investment attractive opportunities are beginning to peek at investors with a keen eye for value. An good example is Kenya Airways, whose fortunes, let's face it, have not been so good. The national carrier was first hit by the rising price of fuel and related cost and then even harder by the post election violence that plagued Kenya. However regardless of all this, one would expect that the company's low PE of about 6 coupled with its relatively OK dividend yield of 3% would be an indicator of value. These two reasons, coupled with the fact that the tourism industry is slowly getting rebounding, clearly indicate a good buying opportunity given that this share is currently trading at a paltry Kshs47 today. Surely the earnings declines will not go on for eternity.

One more opportunity is the National Bank of Kenya. In a finance sector where the average PE ratio is in the region of 20, this bank is still languishing in the 7s and 8s. Some analysts have tried to beat down this stock because the bank hasn't been paying dividends and has also been loss making. A closer look at the fundamentals of the bank coupled with the fact that the losses have now been overturned and the non performing assets (which were due from GOVT) have now been swapped for treasury bills/bonds, has opened a cash inflow for the bank. I would expect the bank to turn the page this year or next and therefore would consider this an opportunity.

One misconception I've noticed is that local investors on the Nairobi bourse seem to believe that rights issues represent an investment opportunity and they seem to throw all fundamentals out through the window.

Tanzania has announced the next IPO for National Microfinance Bank Ltd but unfortunately, given the foreign exchange restrictions currently prevalent in the country at the moment, we can't do so much in search of Value over there.

Neighboring Uganda though has an IPO upcoming for Crane Bank limited, which has been consistently churning out profits over the years. Having interacted with the bank's management, I know that they are risk conscious and the IPO provides a priceless opportunity to break into frontier markets for those investors/fund managers looking to diversify their portfolios further. After all, we all learnt the relationship between development markets and frontier markets. Nil correlation.

Additionally, the Uganda Clays rights issue was oversubscribed. We had expected the share price to drop from the then Ushs6,ooo to about Ushs 3,500-Ushs 4,000 but this did not happen. Apparently the price continued skyrocketing even doubling on the announcement of results and whopping Ushs 140 dividend per share. My lesson from this share's performance is therefore not to underestimate the power of monopoly, the absence of substitutes, the high barriers to entry into the company's market and the low bargaining power of buyers............jeez, it is Micheal Porter's competitive strategy put into practice before my own eyes. Moreover subsequent to this, the company, whose management have traditionally been quite conservative, finally set up a WEBSITE....www.ugandaclays.co.ug

As a result of the above lesson, I am amending my investment strategy to attach different weights to the above conditions/market forces................Talk about FUNDAMENTALS

DISCLAIMER: This blog does not constitute investment advice. Though utmost care has been taken while preparing this blog, I do not accept liability for investment decisions made as a result of this blog.

What's happening..............

in Sub Saharan Africa at the moment?

I ran into colleagues of mine over the weekend and I discovered that we all think along the same lines regardless of whether we correspond or interact over issues relating to investment. More often than not, we all believe in investing but are many times dumbfounded when the issue of what to invest in comes up. Nevertheless it was quite nice and intuitive to exchange ideas over the various investment opportunities that are on the table at currently.

Safaricom, the hottest potato at the moment is in its last week with the closing date for applications for individual investors being effectively a week from now (23/4/08). Much has been said about this IPO. Issues such as under/oversubscription, who the hell is Mobitelea, Impact on the Nairobi Stock Exchange and Uganda Stock Exchange, First on line application process in East Africa cetera, cetera. I've personally been privy to the prospectus (as is every eligible potential investor out there) and also IPO research reports and investment recommendations from some respected investment advisors out there. All I can say is that they all seem to say is that they all recommend Safaricom as a long term buy. But the simple advice, without going into technobubble is that one can never go wrong with African IPOs (more over East Africa at that). Whatever happens, the share price will take some pummelling to fall significantly below Ksh5.

Unfortunately, in my view, the factors all point to an undersubscription but hey what's to lose?

On a sad note, the Bank Of Tanzania denied Tanzanians the right to participate in the IPO by refusing to ease the capital market and foreign exchange restrictions. The restrictions have always been there. I remember trying to invest in Tanga Breweries sometime back and my broker telling me that if I bought any shares, it would result in the proportion of foreign ownership of the company exceeding the statutory minimum required for foreign ownership. Duhhhh, I only wanted a few shares!!!!!!!!!!!!!!!! So much for the East African Community/cooperation blah blah blah.

Unfortunately, the same thing just happened with respect to the Celtel Zambia IPO for which the prospectus is expected to be issued on 28/4/2008. Naturally and as I have just explained, one can never go wrong with African IPOs so if you ask me, this is a very strong buy. Save the numbers for the shareholders general meeting.

In Kenya, the only marketing company listed on the exchange SCANGROUP scared the hell out of investors by filing financial results before 31 March but they ultimately were published in today's papers. As an investor and ex-auditor, I am always skeptical when companies do not abide by a financial calendar since after all, it is only financial statements whose audit follows a set timetable, with board approval and ratification. Hopefully, we'll ultimately understand the reasons for these delays.

On the lookout for IPOs, generally, we expect Cooperative Bank, Transcentury to list this year.

Tanzania's NICOL, a microfinance/investment company is also programmed to list if they can overcome procedural hurdles.

There is also Crane Bank in Uganda which should list in the 3rd quarter.

The pressure is on for Ugandan listed banks to publish their results. Again, I must point out that DFCU Ltd, Stanbic Bank, Bank of Baroda Limited need to explain why their financial statements take so long. By the time they are published (25 April) for a December year end, they are no longer useful to decision makers. But the only positive is that at the end of the day, the chickens must come home to roost. DFCU's mid year results portrayed a really negative picture which prompted one of my favorite bloggers to opine that it felt like the bank staff just went on a hiatus for a whole 1.5 years and hence forced him to cut his losses and run. Ouch..that hurt! But hey, on the bright sight, so many things have happened to the bank this second half of the year. We would expect the new MD's fingerprints to be all over every decision that the bank has taken.The effects of the disposal of the subsidiaries which were not in line with the bank's business strategy and vision completely effected and the gains utilised to good effect thus creating value. Lo and behold, the loan book must have improved unlike in the prior year and mid year period where these had no change except for increased provisions.

We will expect some good news from Stanbic and Baroda. (No stories from these two) And we will definitely expect some dividend growth. Given that the value of listed companies on the USE has quadrupled, the PE ratios of Baroda and Stanbic, which stand at about 15 and 30 respectively tell a story. The implication is that Baroda has some room to manoeuvre with less than ideal results. (Come on we always considered management very conservative). However, Stanbic does not have any room to manoeuvre. With its PE at a high of 30, you'd expect significant growth to support the faith that the investing public has vested in Stanbic.

Otherwise the bull run that has befallen the Uganda Stock Exchange will have a rude awakening as institutional investors start applying their irrelevant fundamentals to a nascent exchange.

Oh, and I was alerted by a friend that the USE has redesigned its website which is great in so doing, the daily trade summaries appear to have vanished. We'll keep looking.