[2008-09-10]  Share prices fall as more shares begin trading on the bourse
Prices of shares of three local companies listed on Uganda Securities Exchange came down on Tuesday, following an increase in the number of shares at the bourse.

Share prices of DFCU Group, British American Tobbaco Uganda (Batu), and New Vision Printing and Publishing Company Limited (NVL) fell on increased supply from shares of Bank of Baroda Uganda (Bobu) and Uganda Clays Limited (UCL), which have both carried out share splits.

A share split is a corporate action in which a company’s existing shares are divided into multiple shares.
The number of shares held by shareholder rises, but the value of the shares remains the same. Through the share splits, shareholders of UCL and BOBU were given additional shares but at reduced prices giving them an opportunity to sell them off with ease.

Bobu carried out its share split on Tuesday and offered its shareholders ten more shares for every one held. The split resulted into 400 million shares at Shs600 each from 40 million shares, at Shs5,560 as of Thursday last week. The Bank’s split closely followed UCL’s share split last week, which increased the number of available shares to 900 million at Shs110 up from 9 million.

Investors at the stock market are said to be shifting their demand from companies with highly priced shares including (NVL, DFCU, and BATU) to those whose share prices have been reduce, through share-splits. As a result some shareholders are also willing to let go of their shares at lower prices to try and attract buyers.

Stockbrokers also attributed the drastic fall in the NVL share price from Shs2, 480 to Shs2, 000 due to a recalculation of the company’s share price, following the listing of its additional 25.5 million shares that accrued from its August rights issue. New Vision now has 75 million shares on the market and there is plenty of supply and low demand from buyers.

The Head of Sales at Dyer and Blair Uganda, Mr Joseph Rwanshote, said before the rights issue the company had predicted a scenario whereby, after market capitalisation is divided by the number of issued shares the price would be driven down. “The price is likely to stagnate at those levels for some weeks. But I wouldn’t be surprised if it came down further,” he said.

Some stock brokers have attributed the recent rise to the company’s share price to self-made publicity, about its share price and investments. As a result investors’ choices were influenced pushing up the NVL share price. However, it is expected to be corrected by market forces. Even with a supply of 380,000 shares at its counter, only 980 shares were sold at a reduced price.

Commenting on BOBU, Mr Rwanshote said demand has always outstripped supply, and it continues. He added that demand has shot to about 1.7 million shares but barely any supply to satisfy IT.

“Only 1,000 shares were traded at Shs600. The forecast is Baroda will continue to sky rocket,” he predicted. A market report from the Uganda Securities Exchange indicated that Tuesday generated increased activity at the UCL and Stanbic counter.

More than 3.5 million Stanbic Bank Uganda (SBU) in excess of Shs757 million were sold while 1.5 million UCL shares worth Shs305, million were exchanged. Stanbic’s shar price rose from Shs200 to Shs220 while Uganda Clays also rose to Shs225 from Shs200, last week, on the back of increased investor demand for the companies’ lucrative and yet, are cheaply priced.

The USE All Share Index, the barometer of performance, at the market rose to 984.27 up by 22.25 points, reflecting activity at the market.

Source: © 2008 Monitor Publications Ltd