The Independent (Kampala)

24 November 2012

Uganda: Ten Potential IPOs

Having more companies on the bourse would spur business expansion, productivity and eventually development

With the long-awaited Umeme Initial Public Offering (IPO) being oversubscribed by 35%, attention is now shifting to almost a dozen companies from various sectors that should launch their own IPOs on the Uganda Securities Exchange.

Capital markets analysts say awareness in the Ugandan public on the need to invest in long term ventures means that the time is ripe for other companies to list on the stock market in order to reap from the massive advantages that come along with being a listed company. For example, listing on the stock market has enabled Vision Group to invest massively and hence become one of the most profitable media companies in the region.

But apart from benefits to the company, analysts say once a country gets as many companies as possible to list on the stock market, national economic growth is accelerated. They argue that more companies could potentially increase production volumes for both home consumption and for export on top of creating job opportunities, plus revenue for national development.

One expert who is knowledgeable about the capital market in Uganda, says that some big companies would rather repatriate all their profits than list on the USE so that local Ugandans can share part of the profits accruing from their operations in the country.

She says listing is important because it would promote a culture of saving among the public, with the savings being invested in huge projects, with good returns to the investors. She adds that once a country has more companies listing and expanding their businesses, there would be more jobs created, more productivity, more revenue to government and thus economic growth.

Tullow Oil

Tullow Oil Plc is a global oil and gas exploration company with its headquartered in the UK. Being an experienced company in the oil business, Tullow Uganda, a subsidiary of Tullow Oil Plc, stands in a good position to list on the USE. Tullow Oil Plc is listed on the London Stock Exchange and had a market capitalisation of about £12.5 billion as of December, 2011 - making it the 30th largest company on the LSE. The company, which is exploring the Albertine Grabben in Western Uganda, had earlier announced its intention to list on the USE this year but the process was put on hold. Already, it has secondary listings on the Ghana Stock Exchange and Irish Stock Exchange.

MTN Uganda

MTN Uganda is a subsidiary of the MTN Group, a multinational telecommunications company, based in South Africa. MTN Uganda is the market leader in Uganda's telecom market with a share of about 47%, which has made it the most profitable company in Uganda for more than a decade. The MTN Group is already a publicly-traded company on the Johannesburg Stock Exchange, which means cross-listing on the USE would not be a big hurdle to jump.

Simba Telecom

Simba Telecom, which is owned by Ugandan businessman Patrick Bitature, is the largest distributor of airtime in East Africa, working with the major telecom networks in Uganda, Kenya and Tanzania. It is also one of the largest retailers in East Africa with over 100 retail outlets and is partnering with Nokia to sell high quality mobile phones. The company's consistent dedication to the growth of the industry and its expansion ambitions put its shareholders in a good position to offer shares to the public in order to tap into the massive telecom potential both in Uganda and the region.

Mukwano Group

The Mukwano Group of Companies is a conglomerate based in Uganda but with operations in other East African countries. The consumer goods manufacturer maintains manufacturing facilities and assets in Mombasa, Kenya and Dar-es-Salaam, Tanzania, among other locations. It is also involved in real estate developments, bulk storage and shipment, cargo clearing and forwarding and agriculture. The potential for expansion is massive given the ready market awaiting its products and services across the continent.

Serena Hotels

The Serena Group comprises a collection of 32 luxury resorts, safari lodges and hotels, which are located in East Africa (Kenya, Tanzania, Rwanda, Uganda and Mozambique) and Southern Asia (Pakistan, Afghanistan and Tajikistan). The Serena Hotels Group is one of 96 companies that make up the Aga Khan Fund for Economic Development (AKFED), the for-profit arm of the Aga Khan Development Network (AKDN). The Group trades under the name Tourism Promotion Services (TPS Serena). The company is already listed on the Nairobi Stock Exchange (NSE), which means cross listing on the USE would be a mere formality. The process of cross listing is said to be progressing well.

Ruparelia Group

Under the chairmanship of businessman Sudhir Ruparelia, the Ruparelia Group is one of the most diverse companies in the country, with interests in banking, insurance, education, real estate development and management, floriculture, broadcasting and hospitality among others. Sudhir told The Independent that they have no plans to list any of their companies at present because "our companies are adequately capitalized." However, he was quick to admit that offering shares to the public would help to diversify ownership company, which would "generally" increase transparency. However, he said that at present the Ugandan stock market is not "yet mature enough."

Uchumi Supermarket

Uchumi is the region's largest and most popular supermarket chain. Uchumi, which is listed on the Naoirobi stock market, was recently said to be planning to cross-list in Uganda, Tanzania and Rwanda. Quoting Uchumi chief executive Jonathan Ciano, reports said they are awaiting a go ahead from the regulator CMA.

Centenary Bank

This indigenous bank is the 6th largest bank in terms of assets and market share in Uganda out of the 25 banks. Its primary focus is retail banking and offering credit to rural farmers, processors of agricultural produce, small manufacturers, small traders, importers and exporters. This means its potential for growth both within and outside Uganda is great.

Roko Construction

ROKO is a construction company that has operated in Uganda for the last over 40 years. It operates in other counties like DR Congo, Rwanda, and South Sudan. Over the years, it has been the clear market leader in the construction industry but is also limited by its low investment. The company has accomplished huge projects for both government and the private sector worth millions of dollars. Experts say it has potential to offer shares to the public and further expand its operations across the region and beyond.

Airtel Uganda

Airtel Uganda is a subsidiary of Bharti Airtel Limited, commonly known as Airtel, an Indian telecommunications Services Company headquartered at New Delhi, India. Airtel Uganda is the second largest telecom operator in Uganda. Its parent company operates in 20 countries across South Asia, Africa and the Channel Islands. Airtel is the world's third largest mobile telecommunications company with over 261 million subscribers across 20 countries as of August 2012. It is the largest cellular service provider in India, where it is listed on the National Stock Exchange of India.

Shoprite

Shoprite Uganda is part of a South African-based retail and fast food company. The group is listed on the Namibia and Zambian Stock Exchange. It operates over 1,200 corporate and 270 franchise outlets in 16 countries across Africa and the Indian Ocean Islands.

Joseph S. Lutwama, the research and policy manager at the CMA, says that while the stock market has potential to grow, there is need for

tangible support to the private sector. For example, he said mortgage sector in the country and in the region would require long term financing of more than 30 years, which commercial banks won't be able to finance from their customer deposits.

Indeed, the CMA is so serious about having more IPOs that it has set up the Growth Enterprise Segment (GEMS), a listing segment targeting SMEs. This scheme favors SMEs that have proper growth plans and those that can show the potential to grow through a prospective business plan, good corporate management, and good record keeping among others. With pending liberalisation of the pension sector, Lutwama says more individuals would be able to participate in the capital market through the pension schemes to which they belong.

Benefits of going public

  • Access to massive capital to finance expansion and growth
  • Creates more liquidity for the current owners
  • Enhances the company's public profile and brand
  • Improves on debt financing terms
  • Creates extra assurances for partners, suppliers and clients
  • Enhances loyalty of key personnel
  • Leads to superior efficiency of the business

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