Latest news with #USE
Zawya
26-05-2025
- Business
- Zawya
Uganda: Umeme suspension on USE hits investors
Umeme's continued suspension from the Uganda Securities Exchange (USE) trading floor has deepened uncertainty among investors amid lack of consensus between the power distributor and government over the final buyout amount and legal transfer of property leases to Uganda Electricity Distribution Company Ltd. The company's 20-year electricity distribution agreement expired on March 31, 2025, following the government's decision not to renew its commercial contract. Whereas Umeme handed over electricity distribution operations to power utility on April 1, 2025, the government's failure to agree on a suitable, final buyout amount with the power distributor triggered a series of negotiations that are yet to bear fruit. The USE suspended Umeme's shares from trading activity for two weeks at the beginning of April to enable the firm to secure a compromise deal with the government without causing severe distortion in its share price. But the absence of a commercial settlement from the two parties compelled the USE to extend the suspension window for an extra 30 days starting April 14. Despite lengthy, boardroom negotiations that lasted more than 40 days, a final consensus over contentious matters surrounding Umeme's exit from the power distribution arena remains elusive. Nonetheless, the USE extended the suspension period to May 31, 2025 in a decision meant to enable the utility company to finalise negotiations with the government and also publish its latest financial statements prior to resumption of trading activity. Umeme Limited's share price stood at Ush415 ($0.11) at the USE prior to its suspension from the trading floor, according to trading reports. While Umeme Limited issued a final buyout figure of $234 million, the Electricity Regulatory Authority (ERA) reportedly offered a sum of $201 million. The Auditor General's Office, an entity obliged to audit Umeme Limited's financial claims filed with the government, arrived at a final buyout amount of $118 million. Another issue of contention lies in the transfer of leases for office and residential space previously inherited by Umeme Limited in 2005 from UEDCL. Though the value of those leases is not captured in Umeme's previous financial statements, the government's stance on the transfer of those assets remains unclear. The biggest issue surrounding the negotiations is the determination of the final buyout amount within the provisions of our contract with the government. Failure to resolve this issue in the coming days will automatically lead us into arbitration proceedings. There is also an issue of legal transfer of leases for certain assets that has not been resolved. That means UEDCL cannot access those assets until the transfer issue has been resolved, even though we handed over operations some time back. But we feel it is more important to secure shareholders' funds during the negotiation process than rushing to publish financials,' said Selestino Babungi, Umeme Limited's Managing Director.'Negotiations with Umeme are still ongoing. Negotiations are negotiations! They gave us their ideas and we gave them our ideas. We want to give them an amount that reflects the outcomes of the government's audit report that was generated from their operations before the concession agreement expired. But I wouldn't encourage them to opt for arbitration because it is a bad thing. Those negotiations will not affect our budget for next financial year,' observed Patrick Ocailap, Deputy Permanent Secretary at Uganda's Finance Ministry. Umeme Limited's total investments in the electricity distribution network are estimated at $800-$900 million, a figure set to determine its final buyout amount subject to various technical factors such as asset depreciation ratios.'Investors are eagerly awaiting Umeme Limited's full-year financial results for 2024. They are hopeful about a bigger payout amount compared to what the government initially proposed. The market is filled with anticipation at this time, and we haven't received any calls from investors worried about Umeme's exit process for some time. We haven't received any market bids or offers for Umeme shares in the pipeline before the release of its financial results,' noted Calvin Bateme, an equity analyst at Crested Capital Limited.'Umeme Limited entered the industry at a difficult time when power cuts had become a nightmare to us, but has excelled on the job. It is therefore unfair for the government to indulge in a breach of its contractual obligations. This situation will affect future financing arrangements in the power sector. For example, if the government chooses to borrow money for the expansion of UETCL's network tomorrow, many investors would choose to either demand a higher interest rate on a loan facility or refuse to provide the loan altogether. Umeme Limited also made certain politically driven investments in the final year of its concession agreement in some areas, and failure to recognise them would lead to a loss of around $100 million against its buyout amount,' said an energy industry executive who requested anonymity, citing confidentiality rules.
Zawya
25-04-2025
- Business
- Zawya
Kenya Airways shares in Dar: Why there is no trading 3 months after freeze lift?
Kenya Airways (KQ) shares are still not trading on the Dar es Salaam Stock Exchange (DSE) more than three months after Kenya's regulator lifted the suspension of the stock on the Nairobi Securities Exchange (NSE), highlighting the challenges facing cross-listed stocks. A review of equity trading reports on the Tanzanian bourse shows that investors are not trading in KQ shares, missing out on the opportunity to unlock value in a stock whose price has remained dormant at Tsh80 ($0.03) per share. KQ is listed on the NSE and cross-listed on the DSE and Uganda Securities Exchange (USE). The EastAfrican has learnt that even though companies make strategic decisions to list their shares in other jurisdictions away from their primary markets, investors find it difficult to trade in cross-listed shares, as they are largely held by shareholders domiciled in the primary markets. While the KQ share has remained inactive on the DSE, it has gained 13.31 percent in more than three months since resuming trading on the NSE on January 6, 2025. The share price closed at Ksh4.34 ($0.034) on April 23, representing a 13.31 percent growth from Ksh3.83 ($0.02) when trading resumed. Uganda bourseHowever, the feel-good factor from the carrier's improved earnings has yet to yield much impact on the USE. KQ's share price on the USE rose from Ush113.44 ($0.03) on March 31, 2024 to Ush143.3 ($0.039) on March 31, 2025, according to the latest USE market trading data. USE chief executive Paul Bwiso said KQ was up to date with its listing fees and regularly publishes its financials on the market.'But it does not trade a lot on the USE. We expect to receive its latest financial statements before end of this month. But I'm yet to analyse Kenya Airways' current commercial turnaround plan,' he said. The KQ management did not comment on the dormancy of its stock on the DSE, and instead referred us to the Capital Markets Authority.'The answers you are seeking should be from the Capital Markets Authority,' said the airline's head of corporate communications Henry Okatch. Kenya's CMA says the dormancy of the KQ stock on the DSE is largely due to lack of supply of the shares as they are still held in a registry in Nairobi and are not available for trading on the Tanzanian bourse, a development the market regulator says cuts across most of the cross-listed shares in the region.'KQ was cross-listed in DSE and all the shares are registered in Nairobi. It means that there are no shares in the secondary market (DSE) and therefore trading on that market becomes very difficult, because the shares are held in Nairobi,' CMA chief executive Wycliffe Shamiah told The EastAfrican. He added that even those shareholders in Tanzania who might have bought KQ shares through the NSE may be reluctant to sell now in anticipation of price appreciation in the future.'I'm not saying that there are no shares of KQ in Dar es Salaam completely – they will have to confirm that fact, but availability and the intentions to trade may not be there,' Mr Shamiah said. Cross-listed stockCross-listing is usually a strategic financial decision that allows companies to expand their investor base and enhance liquidity by listing their shares on multiple exchanges. In East Africa, 10 companies have cross-listed their shares on multiple stock exchanges. These are KCB Group, Nation Media Group (NMG), East African Breweries Limited (EABL), Kenya Airways, Equity Group, Centum Investments, Jubilee Holdings, Umeme Ltd, the collapsed Uchumi Supermarkets and the Bank of Kigali (BoK). Kenya has most of its companies cross-listed on regional bourses. But currently, investors from Tanzania, Uganda and Rwanda who want to invest in the cross-listed companies on their respective bourses are forced to open Central Depository System (CDS) accounts in Nairobi because these shares are held in a registry by Kenya's Central Depository and Settlement Corporation (CDSC). This means that although these shares are cross-listed, they are not traded on the secondary market but on the NSE.'What we need is to have shares in Nairobi transferred to a depository in the other markets like USE, DSE and RSE [Rwanda Stock Exchange]. But, as long as those shares are sitting in a registry in Nairobi, trading in those shares becomes difficult,' Mr Shamiah said. The CDS is a computer system operated by the CDSC that facilitates electronic accounts opened by shareholders and manages the transfer of shares traded on the stock market.'Many barriers'According to the Kenya's CMA, attempts by regional capital markets regulators to boost liquidity in cross-listed shares through the automation and linkage of the trading systems and introduction of global depository receipts (GDRs) are yet to bear fruit.'We had tried to get a system which would allow us to have junctions so that these securities are available regardless of the jurisdictions but there are many barriers. For example, there are different jurisdiction laws that you will have to go through before. We have tried to harmonise that but that project— the EAC capital markets infrastructure— has not ended,' Mr Shamiah said.'The other alternative, which has become a discussion, is what we call global depository receipts (GDRs). This requires some frameworks to be harmonised, because it is a secondary instrument that has been developed on the original instrument. So, those discussions have been there but they haven't really moved. These were the two very near solutions to what is causing the illiquidity of cross-listed shares.'A GDR is a negotiable financial instrument that represents shares in a foreign company and is traded on local stock exchanges in the investors' countries. GDRs make it possible for a company (the issuer) to access investors in capital markets beyond the borders of its own country. The East African exchanges are working towards integrating the central depository systems and their electronic settlement systems into a single market in the hope of hastening trade in cross-listed shares and increasing liquidity. Kenya Airways shares resumed trading on the Nairobi bourse in January after a suspension of more than four years to pave the way for the restructuring of the company, including a proposed State-takeover through a nationalisation process. Read: Regulator sued over KQ shares trade freezeKQ shares were initially suspended from trading on the NSE on July 3, 2020 to allow for a reorganisation and corporate restructuring after members of parliament began to review a law that would allow the government to take over the loss-making airline and save it from potential collapse. But the National Aviation Management Bill 2020 has since been withdrawn from parliament after the William Ruto administration backtracked on nationalising the airline. KQ's chief executive Allan Kilavuka had petitioned the CMA in a letter dated December 16, 2024, for an extension of the trading suspension of the shares by an additional 12 months, but the regulator rejected the request and instead directed the NSE to lift the trading suspension with effect from January 6, 2025. It came as a relief to thousands of investors who held the KQ stock. KQ is currently majority owned by the government (48.9 percent) and a group of 11 banks under the KQ Lenders Company 2017 Ltd (38.09 percent), Air France-KLM (7.76) percent), employees (2.44 percent) and other shareholders at 2.8 percent. The government and 11 local banks converted part of their debts amounting to $265 million and $167.24 million into equity respectively as part of the financial restructuring plan in 2017. The firm announced a $42 million profit for 2024, ending an 11-year drought. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Zawya
02-04-2025
- Business
- Zawya
Investors eye rich returns as Uganda banks post high earnings
Investors on the Ugandan Securities Exchange (USE) are eyeing good tidings from commercial banking stock as lenders start to declare their end-year results this week. Most of the banks have posted notable gains during the first three months of 2025 on the stock market, a result of investor optimism towards their full-year performance reports of 2024, which are due this week. This pattern has bucked the trend where the bourse has generally reported low-key activity. Yet recent stock market trading statistics show Stanbic Holdings Uganda Ltd (SHUL)'s share price rose from Ush39 ($0.01) in January 2025 to Ush48 ($0.013) recorded in mid-March. SHUL is the holding company for Stanbic Bank Uganda and owns 100 percent shares in the country's largest commercial bank, by assets. In comparison, DFCU Ltd's share price increased from Ush225 ($0.06) to a record high of Ush239 ($0.065) in mid-March according to USE trading reports. DFCU Ltd is the holding company for DFCU Bank Uganda Ltd and owns 100 percent shares in the latter. The Bank of Baroda's (Bobu) share price averaged Ush22 ($0.006) during the same period under review; a sign of slightly bullish investor expectations tied to its full-year earnings for 2024.'Both Bobu and DFCU Ltd invested heavily in government securities last year, and that means stronger interest incomes for 2024. Investors seem hopeful about DFCU Ltd because of notable half-year results published in 2024 and are also optimistic about lower non-performing loans and reduced staff turnover,' said Calvin Bateme, an equity research analyst at Crested Capital Ltd, which monitors and advises on stock market investments. Andrew Muhimbise, a USE retail investor said BOBU's profit for 2024 is likely to increase by less than 20 percent, even though its growth projections in its asset book and loan portfolio may not be certain. Total assets held by SHUL increased from Ush9.3 trillion ($2.5 billion) in December 2023 to Ush10.4 trillion ($2.8 billion) in December 2024, according to its latest financial results published last week. Its net interest income grew from Ush708.9 billion ($192 million) in December 2023 to Ush759.8 billion ($205.9 million) in December 2024, while profit before tax rose from Ush540.9 billion ($146.6 million) to Ush651 billion ($176 million) during the same period under review. Read: Uganda mid-year financial reporting season thrills investorsTotal loans and advances increased from Ush4.2 trillion ($1.14 billion) in December 2023 to Ush4.4 trillion ($1.19 billion) in December 2024; a trend attributed to stiff credit evaluation standards adopted by Stanbic Bank last year. One reason for Stanbic's positive growth was that Uganda recorded better Foreign Direct Investments (FDI) flows last year into the oil and gas sector.'We are receiving a lot of dollars and have got sufficient liquidity to absorb them. We support several oil and gas companies under the local content procurement policy initiated by government.'Our dividend policy is likely to rotate around a dividend pay-out ratio of 60 percent that could slightly increase or decrease depending on circumstances,' said Sam Mwogeza, Executive Director in charge of High Net worth Clients at Stanbic Bank Uganda. This dividend policy pay-out ratio is meant to keep a good balance between rewarding shareholders and deployment of capital for big ticket corporate finance transactions, he explained. Amortisation costs rose from Ush15.3 billion ($4 million) in December 2023 to Ush15.5 billion ($4.2 million) in December 2024, a consequence of new investments made in software tools required for the upgrade of digital transaction platforms that include online banking and the Flexipay platform, according to internal sources. Net trading income grew from Ush270 billion ($73.2 million) to Ush304.2 billion ($82.4 million) during the same period under review. SHUL declared a full year dividend of Ush3.13 ($0.0009) per share for 2024. Its share price closed at Ush48 ($0.013) on 24th March after the release of its full year results. The company's share price opened trading on 25th March 2025 at Ush46 ($0.012) and closed at Ush46 ($0.012) on the same day, USE records indicated. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
