Brokers at the USE. Trading has been dominated by
Although other companies such as Stanbic (SBU) experienced similar price movements a few weeks after their IPO in 2007 (from Shs 70 to Shs 240), some market observers say they were surprised that
"Yes, those factors should have negatively impacted on the price but it has not been the case," said one official at the USE who requested not to be mentioned because he does not speak for the USE.
"But you also know it very well that the company is profitable and has no competitor in its business." He added that it is rare to see foreign institutional investors like Investec sink their money in a company whose future they are not sure of.
Analysts told The Independent that the appreciation of the company's share price is largely attributed to the demand coming from institutional investors especially foreign ones.
The deal, which was worth
The company's major shareholders include
Arthur Nsiko, a research analyst and
"Foreign investors know what is on the ground," Nsiko told The Independent, "they have studied
Nsiko added that the company's current payout ratio (the proportion of the company's earnings paid out as dividends to shareholders) remains competitive at about 40% compared to the other old listed companies in the market like Baroda at 20%, Stanbic at about 45% and DFCU at 40%.
He added that the company has met most of its concession targets, which is why investors are confidently investing in it.
For example, the company has managed to reduce losses from 35% in 2009 to the current 24% and targets 14% by 2018. This reduction, ideally translates into more profits and dividends to shareholders as it makes more power available for sale.
The company, under the concession signed in
The company's financial statement for the period up to
The increase, according to company officials, was attributed to improved performance in operating profits and lower financing costs for the year. The company has paid out a total of Shs 23 billion as dividends for the year 2013 with each share going for Shs 24.8.
Another positive factor is only about 15% of approx. 35 million Ugandans are connected on the national electricity grid; meaning there is still a wide market for
Investors look at who is investing what and in which company before taking part, Kibuuka suggested, adding that any future proceedings in Parliament on the company will do no harm on the share price. It is the performance and the outlook of the company that matters most, he said.
"No one will put their money in a dying stock, and after all,
Nsiko said shareholders eying long term investment opportunities in the market should opt for the financial services industry given the fact that the economy is recovering from the past two tough years that saw annual inflationary pressures spike to 30% from single digit and interest rates to around 27% up from around 17-18% leading to a jump in non-performing loans and reduced profitability.
"We expect the recovery in GDP growth (currently at 5.7% in 2013/14) growth to feed into the entire banking industry, which has always made profits," Nsiko said.
However, Kibuuka, said although economic factors like inflation, the exchange rate and interest rates could change anytime and affect performance of any company, a favorable economic environment is good for any stock on the USE.
He said, however, electricity is more of an indispensable necessity for businesses and for most Ugandans. "Demand for electricity will continue growing," he said, which is good for shareholders in
"While making an investment decision, investors should look at utilities such as
Nsiko said the entire market has not picked up yet because most investors prefer to buy into companies they think will post good profits and make money in a short period.
When asked to comment on the other counters, Nsiko said their evaluation of NVL is 'a hold,' which means that shareholders can hold their stock and wait for some time.
He said NVL is a good stock despite the fact that the company recently incurred huge costs on other group media houses and equipment among other costs. On BATU, the price remains high and stable but there are genuine investors for the company.
On the market generally, Kibuuka said young as it is compared to the Nairobi Securities Exchange (founded in 1954), the USE stands in a better position to grow because
According to the
The report indicates total market capitalization closed the month of June at Shs 23.16 trillion up from Shs 19.33 trillion a year ago. The increase was driven by a rise in the market capitalization of all counters with the exception of KA, DFCU, NIC, SBU, UCHM and UCL that dropped.
Total shares traded dropped to 98.19 million in
Like Kibuuka, Nsiko is optimistic that the 15-year old USE will gain momentum when more companies list on the market and as more new investors join the fray.
At the end of
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