New Kenyan Firm to Get Cross listed on the Uganda Securities Exchange

Friday February 4, 2011

THE impending entry of Centum Investments on the Uganda Securities Exchange (USE) is expected to provide some relief to the low liquidity associated with crosslisted companies. This is premised on the fact that Centum has a diversity of investments.

Liquidity is the ease with which an asset or stock can be bought or sold in the market without affecting the asset’s price. It is usually characterised by a high level of trading activity.

Private individuals and institutions have another chance to take a piece of the four million Centum shares on offer starting February 10 when the firm crosslists on the local stock exchange. The shares will trade at between sh600 to sh700 and will be worth $1.5m.

To address the liquidity issues on the USE, Centum chief executive officer, James Mworia, said the company was planning to facilitate some Kenyan shareholders to immobilise their shares on the USE.

“This (liquidity) has been a problem because the rate of capital formation is higher than the amount of shares available,” said Mworia.

He said one solution is to expand the pool of investable securities.

“Liquidity is a good problem to have because it shows we are developing. The key thing is to take a step forward,” said Mworia.

The other option is a free-float where Centum could make more shares available on the local market, thus increasing tradable opportunities. Also, despite its solid position, the price at about sh700 is still considered a penny stock, according to experts.

Centum invests in education, real estate, beverage and equity, sectors that are mostly “driven by disposable income.”

Centum will become the seventh crosslisted and the 14 listed company on the 13-year old exchange.

Mworia said in Kampala Centum was looking to have 5 to 10% of its issued shares trading on the Ugandan market. “The idea is that we would like Ugandans to be part of investors, not only in Uganda, but in East Africa. This will give Ugandan investors a unique opportunity to access a diverse portfolio,” said Mworia.

Centum is the largest quoted investment company in East Africa, currently listed on the Nairobi Stock Exchange. The Capital Markets Authority approved Centum’s crosslisting in 2010, according to Mworia.

Mworia reiterated that East Africa was not short of capital, but only lacks structural channels to direct the investments.

“Our belief is to pool capital and use that capital to invest in our region,” said Mworia.

Centum was listed on the Nairobi Stock Exchange in 1967 and today holds 37,000 shareholders. In the last five years, Centum has generated returns averaging 47%.

Mworia said about 70% of Centum’s investments and portfolio were in companies that are not listed and real estate.

“The cost of managing the portfolio is 2%, thus it is buying into a company in a cost-effective way. Ugandans will have a liquid company they can buy and sell.”

The company and its local partners are considering a high-end real estate project in Kampala. By last week, the firm was aggressively engaging institutions on their possible involvement in the upcoming crosslisting.

The transaction advisor will be UAP financial services.

By David Mugabe The New Vision Newspaper