[2007-10-15]  Profitability boosts bourse
Profit announcements by listed companies, offshore interest and a booming economy has sent stock prices to an-all-time high at the Uganda Securities Exchange (USE) in recent weeks.

“Share price increment is mainly due to a combination of companies announcing good results, positive outlook and a well-performing economy,” said Harriet Kiwanuka, the head of the bourse’s research and market development.

Uganda Clays (UCL), Baroda (BOBU), New Vision (NVL) and Stanbic (SBU), led the stock price rally after posting good half-year and end-of-year performances.

Other companies that made profits during the year included East African Breweries (EABL) and British American Tobacco (BATU).

The USE’s all share index closed last week at 943.94 from 941.40 the previous week.

Turnover at the bourse amounted to over sh1b with 5,591,384 shares traded.

Market analysts say most of the companies shrugged off an energy crisis that hit their profits last year to post good results this year.

“Last year, companies suffered due to the energy crisis and they under-performed. Many have outperformed their projections this year,” said an analyst.

UCL’s good performance and announcement of a share rights issue lifted the company’s share price to sh3,785, from sh3,230 in September.

The New Vision share price, on the other hand, rallied to a record high of sh600 from sh470 at the close of September.

The shares went for sh200 each during the IPO.

Stanbic recorded a 31% increase in net profit to sh24.2b from sh18.6b the previous year, driven by increased lending and growing customer deposits.

The bank’s shares are currently trading at sh165 from the initial public offering (IPO) price of sh70.

BATU returned to profitability after a four-year loss-making streak to post sh31m in profits after tax in the first half of 2007.

BATU’s shares are currently trading at sh330 each.

Kiwanuka said mostly foreign and local investors were increasingly eyeing fortunes at the stock market, creating demand for the stocks that has in turn sent prices soaring.

“Stanbic’s IPO awakened interest in the local market and participation has increased. We are also seeing a lot of demand from Kenya.

“They put money aside for the IPO but were not allotted all shares.

“So they rechannelled their money to invest on the stock market,” she said.

“We are seeing foreign interest because the returns in emerging markets are good and the possibility of stock appreciation is likely so they know they can easily make money.”

Market analysts say investors are also taking advantage of inefficiencies in the local market.

“We also have existing inefficiencies in the market. Our market is not yet perfect so we don’t have market correction.

“When you announce results; it takes time to factor in valuation of the stock, so the existing gaps create opportunities for investors to make money.”

The eight counter stock exchange has six local companies listed and three cross-listed firms from Kenya.


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