27 August 2014

Kenya: CMA and NSE in New Plan to Attract Upcoming Investors

Capital markets Authority and the Nairobi Securities Exchange has renewed strategies to help uplift the poorly performing Growth Enterprise Market Segment.

The two have reached an agreement to have the bourse install a dedicated team to specifically market the floundering GEMS.

Launched in January 2013,GEMS has struggled to attract issuers with only one company - real estate developer Home Africa - trading since July 2013.

This has greatly fell short of CMA's projections of three to four new listings a year as per its 10-year masterplan from this year.

NSE chairman Eddy Njoroge said yesterday that the persistent drought on GEMS formed a key agenda at a retreat with the CMA in Mombasa on Monday.

"One of the things that we have decided on is that we are now going to have an officer who will do nothing else but go out to market GEMS unit," Njoroge said. "The challenge is more on lack of understanding by potential issuers in terms of the advantages that you get when you list."

The NSE officer is expected to work with about 18 nominated advisors that have been appointed by the Exchange to advise and guide potential firms wishing to go public by taking them through the application process and listing requirements.

GEMs' lonely actor Home Afrika has suffered a heavy dip on its share price since debuting at Sh12 in July 2013 and is currently trading at average of Sh5.50, slightly improved from the Sh3.80 late last month.

Njoroge said the nose-diving performance, largely attributed to lack of clear revenue growth projections, could have dampened interest by potential issuers.

"I must admit it has played a part," he said of the tumbling share price. "Some people felt that that the performance was not very good, it started very high and then went down."

GEMS, targeted at the dominant SMEs, is self-regulated by the NSE and has lower entry requirements compared to the Main Income Market Segment (MIMs) and the Alternative Investment Market Segment.

A company wishing to list is, for example, required to have Sh10 million in paid up capital compared with MIMs' Sh100 million and AIMs' Sh20 million.

Although NSE insists that up to eight firms have applied to trade on GEMS, only Mauritian-based Flame Tree Group-makers of Roto plastic tanks and Zoe cosmetic products-has publicly declared its interest to list by end of the year.

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