Cementing UCB’s legacy
Dec 29, 2007
SHILLINGS AND CENTS<br><br>WHEN the history of the Uganda’s capital markets is written, 2007 and the listing of Stanbic Bank shares will have a special place.
SHILLINGS AND CENTS
By Paul Busharizi
WHEN the history of the Uganda’s capital markets is written, 2007 and the listing of Stanbic Bank shares will have a special place.
In December last year, Stanbic offered for sale one billion shares or 20% of the bank, with each share going at sh70. In January this year, trading in shares kicked off at the Uganda Securities Exchange.
Trading opened at sh135 a share, climbing to as high as sh260 before finally closing the day at sh210, a tripling of the price from the Initial Public Offer (IPO) price. The share eventually closed the year at sh230.
Since then, Stanbic’s shares have dominated trading, allowing the USE to record a near doubling of turnover compared to last year.
The Stanbic share listing has given the USE a boost in several ways.
To begin with, it has shown that the exchange can absorb an issue of its magnitude and much more. Stanbic Bank had to refund sh140b to investors, the issue having been over-subscribed three times over.
Related to that, the share offer has opened the world’s eyes to Uganda’s potential as an investment destination. There was significant regional interest in the offer and later, on as millions of shares exchanged hands during the year, more international interest.
The share was even more attractive to foreign investors as the dollar took a beating during the year. If you converted dollars into shillings and bought the share at sh70, you would not only have tripled your shillings at year end but also made a tidy profit were you to buy back dollars.
On another level, the share has also brought vibrancy to the exchange. In previous years, most local shares on the exchange had been trading at discounts mainly because there was little liquidity on the USE.
Stanbic changed that this year. The increased liquidity on the market also found its way to other counters. As a result, there was a doubling of the share price for Bank of Baroda, New Vision and Uganda Clays, while British American Tobacco and dfcu also recorded significant gains.
For the first time in the exchange’s nine-year history, most counters have reached what most analysts believe is full valuation. They are trading at or close to their true worth.
So Stanbic by sheer size has dragged the exchange out of its slumber and optimised its function as a pricing instrument.
The spill off from this is that we might see the first private companies listing on the exchange in 2008 as confidence grows in the exchange’s ability to mobilise resources. Up to this point, the listed companies were spin-offs from the privatisation process.
Private company interest will be one of the biggest contributions to the economy because it can be expected that they will be forced to improve their management as they will be under greater scrutiny. It is also expected that they will have access to cheaper finance, allowing them to expand and be more competitive regionally and internationally.
Kenyan firms continue to wipe the floor with the regional competition largely because they not only can source cheap money, but have a multitude of avenues from which to choose from.
But the biggest winner has been the individual shareholders, many of whom staked their money on nothing more than blind faith and have gone from glee to embarrassment at the gains they have made during the year — a sh700,000 purchase of 10,000 shares at this time last year is now worth sh2.3m.
It is highly unlikely that the Stanbic share will replicate this performance in the New Year. Barring any accidents, the share is expected to make some modest gains in the New Year.
By energising the USE, Stanbic has also opened our eyes to an asset class that we have never really appreciated because of its intangibility – cash we can count, acres we can see, livestock we can eat, but shares?
The long-term benefit of this is that people can build up their asset base with relatively small amounts of money, creating an asset owning class that will have serious implications on the future stability of this country.
Stanbic Bank – and dare I say the former Uganda Commercial Bank’s, legacy is well and truly established.
By Paul Busharizi
WHEN the history of the Uganda’s capital markets is written, 2007 and the listing of Stanbic Bank shares will have a special place.
In December last year, Stanbic offered for sale one billion shares or 20% of the bank, with each share going at sh70. In January this year, trading in shares kicked off at the Uganda Securities Exchange.
Trading opened at sh135 a share, climbing to as high as sh260 before finally closing the day at sh210, a tripling of the price from the Initial Public Offer (IPO) price. The share eventually closed the year at sh230.
Since then, Stanbic’s shares have dominated trading, allowing the USE to record a near doubling of turnover compared to last year.
The Stanbic share listing has given the USE a boost in several ways.
To begin with, it has shown that the exchange can absorb an issue of its magnitude and much more. Stanbic Bank had to refund sh140b to investors, the issue having been over-subscribed three times over.
Related to that, the share offer has opened the world’s eyes to Uganda’s potential as an investment destination. There was significant regional interest in the offer and later, on as millions of shares exchanged hands during the year, more international interest.
The share was even more attractive to foreign investors as the dollar took a beating during the year. If you converted dollars into shillings and bought the share at sh70, you would not only have tripled your shillings at year end but also made a tidy profit were you to buy back dollars.
On another level, the share has also brought vibrancy to the exchange. In previous years, most local shares on the exchange had been trading at discounts mainly because there was little liquidity on the USE.
Stanbic changed that this year. The increased liquidity on the market also found its way to other counters. As a result, there was a doubling of the share price for Bank of Baroda, New Vision and Uganda Clays, while British American Tobacco and dfcu also recorded significant gains.
For the first time in the exchange’s nine-year history, most counters have reached what most analysts believe is full valuation. They are trading at or close to their true worth.
So Stanbic by sheer size has dragged the exchange out of its slumber and optimised its function as a pricing instrument.
The spill off from this is that we might see the first private companies listing on the exchange in 2008 as confidence grows in the exchange’s ability to mobilise resources. Up to this point, the listed companies were spin-offs from the privatisation process.
Private company interest will be one of the biggest contributions to the economy because it can be expected that they will be forced to improve their management as they will be under greater scrutiny. It is also expected that they will have access to cheaper finance, allowing them to expand and be more competitive regionally and internationally.
Kenyan firms continue to wipe the floor with the regional competition largely because they not only can source cheap money, but have a multitude of avenues from which to choose from.
But the biggest winner has been the individual shareholders, many of whom staked their money on nothing more than blind faith and have gone from glee to embarrassment at the gains they have made during the year — a sh700,000 purchase of 10,000 shares at this time last year is now worth sh2.3m.
It is highly unlikely that the Stanbic share will replicate this performance in the New Year. Barring any accidents, the share is expected to make some modest gains in the New Year.
By energising the USE, Stanbic has also opened our eyes to an asset class that we have never really appreciated because of its intangibility – cash we can count, acres we can see, livestock we can eat, but shares?
The long-term benefit of this is that people can build up their asset base with relatively small amounts of money, creating an asset owning class that will have serious implications on the future stability of this country.
Stanbic Bank – and dare I say the former Uganda Commercial Bank’s, legacy is well and truly established.