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Local listed companies see rise in capital gains on the USE

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The local capital markets sector continues to show steady growth as most companies listed on the Uganda Securities Exchange (USE) made capital gains returns to shareholders.

The companies jumped 278.3% to reach shs4.31trillion by end of December, 2016 from shs 1.14 trillion recorded at initial public offers (IPOs), the latest report from USE shows.

Speaking at the 3rd Kampala Private Equity/Venture Capital Conference in Kampala, Keith Kalyegira, CEO-Capital Markets Authority (CMA) asked local companies to organize their businesses if they want to grow. CMA regulates the local capital markets sector.

“There is over USD45 billion out there for the private equity investors,” he said, adding that the future of Uganda’s business expansion lies in the capital markets. “You must have clear investment strategies and show transparency to attract investors,” he said.

There are eight local companies listed on the USE where issued shares are traded in Ugandan shillings. The companies include Uganda Clays, BAT Uganda, Bank of Baroda and Stanbic Bank. Others are Umeme and DFCU.

Building materials maker, Uganda Clays, which was first to list, showed poor performance on the USE as its capital gains value shrunk -50.5% to reach 9.9 billion from shs20 billion value recorded at the IPO.  The company operates two factories in Wakiso and Kamonkoli, eastern Uganda.

NIC Holdings with its 1.42 shares, performed poorly too, as its capital gains value slumped -6.5% to shs16.99 billion, compared to shs18.17 billion.

The best performer was BAT Uganda which saw its capital value rise by 2900.00% to hit shs1.47 trillion from shs49.08 billion at IPO. BAT is the lead equity investor in the local tobacco sub sector.

DFCU and Stanbic Bank also performed well as their capital value gains changed by 736.96% and 257.14% respectively. Stanbic Bank is the largest commercial bank in Uganda by market share and capitalization.

Umme Limited, supplier of electricity, also had its capital value grow from shs 397.85 billion at IPO to 795.700 billion by end of December 2016.

“The above figures indicate that the earnings growth experienced by many of the listed companies since their date of listing on the USE has translated into meaningful value gains, generating attractive risk adjusted returns for shareholders,” the report states in part.

The report calls on local firms to work towards listing on the USE, saying it offers many advantages such as enhancing the market value of the business, increased visibility and prestige, great efficiency as well as easy access to capital and future financing opportunities.

Further, the report indicates that serious investors dealing with listed companies as opposed to privately owned companies, are at an advantage. “If two similar companies exist, one listed and the other not, the listed company will typically be valued approximately 30 percent more than the private company in the marketplace by investors,” the report read in part.

There is fear among economists that African companies businesses use only 5% of equity funds in loans, while commercial banks form 95% as source of capital. Charles Ocici the CEO of Enterprise Uganda says this is not good as commercial banks charge high interest rates on loans.

In America, total loans make 60% equity funds while in Europe equity funds provide 40% of the loans, Ocici says.


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