[2008-07-03]  Uganda Clays plans second share split
THE Uganda Clays (UCL), one of the most prestigious stocks on the local bourse, is planning another share split, less than two years after the first. This is after the price skyrocketed beyond the sh10,000-mark.

The board has called for an extraordinary general meeting on July 28 to discuss the move.

“A number of shareholders have asked the board to call an extraordinary general meeting to discuss several issues; the most important being a share split.

“This matter became urgent when the share price for the second time in two years went beyond the sh10,000- mark,” John Wafula, the chief executive officer, told reporters on Tuesday at the Grand Imperial Hotel, Kampala.

The second share split - unprecedented in the short history of Uganda Securities Exchange (USE), is expected to create another reduction in UCL’s share price and boost the number of shares available in the market for potential investors.

“We are under a lot of pressure from shareholders and stockbrokers. They think our share price is too high.

“It is something that we are going to recommend to our board,” Wafula said.

The increased pool of shares on the UCL counter is expected to improve liquidity through higher trading volumes generated by investors disposing of part of their stock portfolios.

Though the share price is around sh10,160, having shed previous gains due to reduced investor interest on the USE in the wake of the recent Safaricom initial public offering, the pressure to execute a second share split is reported to have peaked when the share price hit sh7,000 in late April.

The company has consistently performed well on profit growth and market share in roofing tiles and building bricks but its counter at the USE has frequently suffered from low liquidity reflected in minimal trading volumes due to poor supply of shares and rapid share price growth.

This scenario led to the first share split in 2006 after the stock registered an all-time high of sh22, 500. The split reduced the share price to sh2, 255, leading to a short-lived improvement in liquidity.

The rights issue in April is believed to have registered a minor improvement in trading volumes.

Some recent trading sessions at the USE witnessed no shares traded on the UCL counter.

But some investors are reportedly opposed to the share split because of its feared impact on their share portfolio.

There is still no guarantee that increased shares will cure UCL’s share liquidity problems.

This is because the massive growth in the quantity of its shares, from a mere 500,000 at its IPO in 2000 to a sizeable nine million following the recent rights issue, has not solved its liquidity woes.

Wafula also reported that due to upheavals in Kenya after the December post-election violence and the fluctuations in the prices of steel, would delay the commissioning of the Kamonkoli factory by two months.
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