4 December 2011

Uganda: Bank, Umeme Listing May Boost Exchange

Kampala — Housing Finance Bank (HFB) and power distributer UMEME have hinted at listing on the Uganda Securities Exchange (USE) a move that would boost trading activity.

At HFB the board had approved an IPO for next year pending the approval of shareholders. UMEME on the other hand also awaits confirmation from its major shareholder Actis Capital a UK Private Equity Fund.

Though both companies have not offered specific details on how many shares they would offer or when they would make the move, market analysts have said that if they came up then the "liquidity challenges" would be dealt with.

"If we are to believe what the two companies, then this would be a big boost to our equities markets. HFB is a profitable bank with a growing asset base and UMEME is almost a monopoly in power distribution," says a market analyst who preferred not to remain anonymous.

At the USE trading floor and the governing council, there is optimism that local companies are interested in listing on the bourse. The USE has seven locally listed companies of which three are commercial banks. A total of 14 firms are listed on the USE with two cross-listed banks. The banks include; KCB, Equity, Stanbic, DFCU and Bank of Baroda.

Housing Finance Bank is 49.2% owned by the government of Uganda, 50% by National Social Security Fund (NSSF) and 0.8% by the National Housing and Construction Company Limited (NHCC).

If it is to list the government or NSSF would need to agree on how many shares should be listed. The possibility though is for the government to sale part of its stake to the public. UMEME is 100% subsidiary of Actis Capital and its up-to the shareholders to decide on how many shares to float.

In 2009, HFB hinted at listing on the USE; "We have already got clearance from the board, so the initial programme of listing will begin. In spite of our target for 2011 we could look at the market, and could list at a much earlier date," Nicholas Okiror the Banks MD was quoted in 2009 by a local media company.

This would not be the first time excitement is caused on the possibility of some local companies listing leaving space for sceptics to doubt the seriousness of some companies. In 2009, Tullow Oil caused a stir in the market when it said it would cross-list as early as April 2010, only for the oil company to push the listing to April 2012.

Some of the companies that have hinted on listing on the bourse include, Uganda Telecom Limited (UTL), Kinyara and Kakira Sugar however none has been specific on when they would list.

UMEME and HFB are yet to seek approval from the regulator, Capital Markets Authority (CMA) before they can be accepted to issue an IPO and eventual listing on the USE.

"The market needs more companies to trade to prove that there is growth and to boost daily activity on the USE," says a market analyst from Dyer and Blair.

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