Performance to date on USE ( 367 Days)

BATU - 900, BOBU - 680, DFCU - 710, NVL - 1510, SBU - 145, UCL - 125

For the last 3 months I have been unable to sell my BOBU for lack of demand and watched in dismay as the price went up through the roof and then came down again to a point where I think the shares are at a fair value. This means I will now hold the ones I was unable to sell (90% of them)

BOBU 130% annualised
DFCU -7.1% annualised

Consolidated position is 23% annualised.

Current Strategy
Buying: DFCU
Watching: UCL BOBU
Selling: all others

Performance to date on USE ( 325 Days)

BOBU 250% annualised
DFCU -13% annualised

Consolidated position is 57% annualised.

Current Strategy
Buying: DFCU
Watching: UCL SBU
Selling: all others

September 11 State of Affairs at the Uganda Securities Exchange (Stock Market)

BOBU - 630, DFCU - 780, NVL - 1970, SBU - 205 UCL-250
I have already covered my sentiments about the valuations of the UCL counter in June but now things are bordering on ridiculous. The P/E ratio favoured by many people for the counter has hit 100. We are yet to see a major decline in the USE index since its inception and probably that of the exchange itself. People seem not to want to lower thier expectations on that counter. Expectations on it are even worse than those on the stanbic counter. I wonder if the Ugandan Government would bail it out in case of a collapse like the US government did for Fannie Mae and Freddie Mac earlier this week. Mark you this counter is one of the smallest in equity terms on the exchange -- not too big to fail unless we have some politicians invested there.

Interestingly, Mr Owiny the general manager of Stanbic Investments, East Africa had this to say in one of the top papers in the land (monitor) (Sept 7th 2008 in the monitor). "Uganda Clays is doubtlessly the company of the future" !!!!! I really have to spend time and find that icon for eyes rolling -- it seems well deserved here. Either he is getting ready to offload his UCL shares for stanbic investments, or something even worse. (There is a slight chance that my radar is off on this one but I wouldnt bet on that -- obviously)

Stanbic continues to see little change in share price. They have opened up thier internet banking platform to customers for a one off payment of 5000. And for the most part it works well except the feature to send email to the. They dont read the mail. Also if you need to do a transfer of more than 1 Million, well you are out of luck. They have also become more aggressive on the loan front where they will come to your office with the application forms for you to fill !

Pound rate has dropped from 3500 to about 2900 in the last 3 months. I wonder how- if at all - it will affect inflows from investors in say the UK.

DFCU. This continues to be my fav. counter. For now price still hovers around the 780-820 range for the last six months. I believe there is untapped potention in this stock. I am buying as much as possible of this. Currently I have made about 2% on this counter annualised.

BOBU Got my first dividend cheque last week. If the trend continues I may have to part with this stock next month or at 1000. Since Dec I have made 130 % return annualised on this stock. I am holding this

NVL. This has moved from 2500 to 2000 in one trading day and is now heading lower. This is as a result of rights issue shares that began trading earlier in the week. I am anxious to see and over correction so that I may jump in (around 830) !

My performance on the stock exchange since I began in Dec 2007

BOBU 104% annualised
DFCU 8.3% annualised

Consolidated position is 42% annualised.

Current Strategy
Buying: DFCU
Holding: BOBU
Selling: all others

New Vision Rights Issue

Elligible participants: all on register at 26th June 2008
Share begin trading on 8th Sept


25,500,000 shares at 1,100
1 new share for every 2 held

current share price 2510.

Should be a good deal for holders ...

For a discussion about rights issues please see wikipedia or nairobist

UPDATE: 29.1 Billion raised. Government opted out of rights issue reducing its holding from 80% to 53%.

Rogue broker at Uganda Securities Exchange ?

Sadly, we now apparently have rogue stock brokers in Kampala.

Be careful that you check that the right number of shares you ordered were bought/ sold at the price you specified; or at least the price as on the day of trading. This information is available from the USE website.

The USE suspened the rogue broker and CMA has made a public statement indicating that it will review the USE decision.

Information on this story is available here

Uganda Clays to split stock again

Uganda Clays is considering a second stock split , shareholders were undecided on wheather to have
a 1:100 or 1:1000 split !
Finally by a small margn, the 1:100 camp won out.

Get ready for a crash coming soon to this counter this year or next ...

One statement in there that I found interesting was
"But some investors are reportedly opposed to the share split because of its feared impact on their share portfolio."

Another interesting one is from the general manager of dyer and blair (stock broker)
" the share split ought to be subjected to a 10-to-1 ratio but much earlier than next year, to guarantee effective results"

Can anyone venture to state what these mean?

reference:
http://www.nationmedia.com/EastAfrican/current/Business/biz160620084.htm

The good, the bad and the ugly

Lets assume you have found a way to discern the ranking of the various stocks trading on an exchange.

Lets take the Uganda Securities Exchange as an example.

So the hard work is done, you have valued all the companies on the exchange and given them a
ranking from 1 to say 6. (ok, there are more on the USE but 3 of them have never really traded in years so
we wont include them).

Lets divide them into three neat piles:
1. the ones we need to buy
2. the ones we dont need to buy or which if we have we dont need to sell.
3. the ones that must be sold.

How do we group them into the relevant piles?

Do I hear someone call for a normal distribution? Any mathematicians out there? No?
Ok, lets look to a simpler method.

What marks out of 100 would you need to get as an investor to be really good at what you do?
We know that stock market indexes get an average of about 50% because by defination they are averages yet most investors and scholars agree that indexes are actually quite good. So we know that anything north of 50% is quite good. Lets aim high, lets say 80% is what works for us. This means we only pick the top 20% of the pool.
So far so good.

The bad ... Lets see... say anything better than average we can hold. This means we hold anything else in the top 50%.

The ugly.
Anything worse than average we sell !

In practise with 6 stocks on the exchange.
Buy 1.2 stocks ie the first one
Hold the next two stocks
Sell the last three

So there you have it!
The good, the bad and the ugly !

Mutual Fund/Unit Trusts/Collective Investment Schemes Investing in Uganda

This has been possible for quite a while.

Currently the only funds running are from African Alliance, but this does not mean they only invest
in companies on the USE, or the various bonds and bills in the country.

Some years back upon inquiring where they invest, I was told that information is only available to fund
investors. (yeah, chicken and egg, but I guess you can put in alittle and wait for the annual report!)

They have the following funds:
Fund
Balanced Income Fund (Initial Fee 5%)
High Yield Fund (2.5%)
Uganda Money Fund (?)

Contrast this with investment in individual stock were the commission is 2%.

Uganda Budget Financial Year 2008/2009

Was delivered yesterday.

Updates are at http://www.finance.go.ug or mores specifically at
http://www.finance.go.ug/budgets_background.php

These include the budget itself as well as a document with a background to the budget.

Budgets for previous years can be seen at the site.

There is no tax relief for companies listed on the exchange.

Privatised Unlisted companies to be sued

The following companies were to have offered to the public at least 10-20% of their holdings.

1. Uganda Telecom Limited. (lead advisor Data Bank Consortium)
2. Lake Victoria Hotel.
3. Apollo Hotel
4. Barclays Bank
5. Tororo Cement Works
6. National Insurance Corporation
7. Kakira Sugar Works
8. Kinyara Sugar
9. Uganda Grain Milling (now insolvent)

This would raise the number of local listed companies from 6 to 15.

The director of the privatisation unit has asked the solicitor general to seek legal redress
to ensure that these companies list according to the east african.

I wonder how this will proceed.

With the budget coming up in a couple of weeks or less, the best way forward would be to give tax incentives
to companies that list on the exchange.

Bank of Baroda Share Split

10 for 1 share split approved for BOBU.

The counter has been slowly growing by 30/= the maximum increment each trading
day. Shares for purchase at this counter have been scarce.

There is every indication the liquidity on this counter will increase after the split (because it is unlikely
to grow at 3/= per trading day after the split). I look forward to reaping the benefits of this!

Government Treasury Bill vs Equties

Having looked at the articles at
http://www.bdafrica.com/index.php?option=com_content&task=view&id=7932&Itemid=5812
and a response at
http://mjengakenya.blogspot.com/2008/06/bonds-vs-equity.html

When you buy stock, you pay a premium over current value of the stock you are buying.

This is because you factor in growth and future earnings.

There are many ways to value a stock for example.
1. P/E ratio - where you read tea leaves and guess where the stock will be one year (or many years) from now.
2. Discounted Cashflows - similar to 1. you guess where the market will be in the future
3. P/B - where you value a company basing on where it is now and how fast it has grown to date.

Most people believe 3. does not hold for new age stocks which do not have tangible assets but instead hold
intagibles.

I have done a comparison of treasury bills (1yr) and two stocks on the Ugandan exchange using the P/E
method

Here is the information we will use:
1 yr tbill gives 12% return
UCL gives 13% return on equity historically and has a P/E of 44
BOBU gives 23% ROE and has P/E of 15

in the first year since we pay a premium for buying the stock the earnings yield is 1 / PE
for UCL it is 2.3% and BOBU 6.7%

so we have the following table for increase in values for 4 years for tbills and 2 stocks

tbill 1.14 1.14 1.14 1.14
ucl 1.023 1.13 1.13 1.13
bobu 1.067 1. 23 1.23 1.23 1.23

After 2 years, bobu will have passed tbills.
After 5 years the growth would be as follows:
bobu 144%
tbills 76%
ucl 67%

will have grown to twice the tbills but ucl will not have caught up with tbills !

Now the price on the market might not reflect these underlying values but if one waits a while
the market will correct itself to these values.

Tbills beat over valued stocks. This means that on the basis of P/E and ROE one can determine
which stocks are unlikely to beat tbills in the long run.

Probably a better metric is to use the average earnings over the past 3 years than to use a forward
earnings.

I will go with Miss Kigen on this one!

One mans visit to the Ugandan Stock exchange

I have just read with interest a reporters view of the stock market. The reporter was writing a story for
businessweek.

He highlights that most trades are done just minutes to the closing bell with the rest of the time spent
waiting for other brokers to make better offers.

It will be interesting to see how this changes when the exchange moves to electronic trading.

You can find the full picture here

Of dividends , quarterlies and investment systems

Just read an interesting blog over at
http://uginvestor.blogspot.com/2008/04/bank-of-baroda-uganda-how-conservative.html

Dividend:

Ok, so BOBU is offering 70/= per share same as last year despite much better performance; I am not moved. I really wouldnt want to have a dividend.

Better to let the company plough that money back in and get that value as capital gains

Quartely reports:

If only we could rally as stock holders at AGM's (which I am guilty of never having attended) and demand
that quartelies be published in the news papers and also posted onto the website, we would all be much better off. Also it should be that regulators have something about this in the regulations -- must check sometime.

Investment systems:
I remain firmly in the value investing camp. Also I read profit and loss statements and take with more salt than I do the balance sheet. Cashflow statements seem to be largely unheard of in reports that companies produce but I would probably hold them closer than the P&L.

Liquidity problems on the Ugandan Securities Exchange

After 3 short months investing on the exchange, I have finally run into the
lack of liquidity on counters trading on the Ugandan exchange, having gone for 2 months
without being able to purchase some stocks yet I was bidding the maximum daily increase.

I guess it is time for a stock split on counters like BOBU so that share prices can grow faster
to stimulate liquidity.

New vision rights issue is coming up soon, in response the crowd is rushing to buy pushing up
the share price.

Annual reports month and increased banking competition

So far BATU , SBU and BOBU have released annual reports for the year ended 2007
we are now waiting on UCL,DFCU.

NVL year ends in June so they are not due.

There is increase competition in the banking arena.

Barclays has awoken. They are opening new branches like crazy.

Equity bank of Kenya has acquired Uganda Microfinance Limited UML

Echo bank has allegedly acquired Commercial micro finance CMF

Warid is set to open a new bank in town.

KCB has entered the Ugandan market after dropping considerations for acquiring DFCU

UBA has entered the Ugandan market.

Trust bank set to open soon.

Banks are opening regional offices all over east africa.

What impact might these have on performance of banks listed on the stock exchange
ie SBU, DFCU and BOBU?

Safaricom IPO news, Annual Reports

With the Safaricom IPO in full swing, we are now seeing banks in Uganda for the
first time ever, offering loans to buy shares during the IPO. KCB has jumped in as
well as Standard Chartered offering loans of up to 50 Million.

Obviously brokerage houses are announcing that this is the best buy of the century.
Also apparently 'overweight buy' means you must buy this; just when I thought being overweight
was not a good thing.

In other areas, since annual reports are expected before end of April for companies with a
financial year ending 31st Dec, we are likely to see some price swings.

I am firmly not in the camp buying Safaricom even thought its future looks bright.

BATU annual report

BATU annual report was released in the press earlier in the month.

They have turned from a loss making entity into a profit making one again.
Equity is still currently negative.

I am still many years away from buying this one though.

They need to prove themselves.

High turnover on USE, Safaricom IPO impact

This week has had the highest turnover to date of the USE since inception.

On one particular day, turn over was 12 Billion UGX.

6 - BOBU - a block transfer of shares on an all or nothing basis (AON)
4 - BATU - announced a profit after making losses.
2 - UCL due to rights issue being second last trading day for the rights issue

In spite of the impending Safaricom IPO, we have so far not seen price drops as
shareholders liquidate existing share to purchase at the IPO in spite of several newspapers
and TV stations reporting drops in prices. I wonder where they are looking because this is not the case *yet*

No offers on counters/ rights trading on UCL

Trading on the stock exchange is very light, there are alot of bids on all counters but no offers.

On many counters it is impossible to actually buy anything because I am told people are holding
out for dividends ...

The rights trading on Uganda Clays has kicked off.

some google links to companies listed on the uganda securities exchange

Having scanned the net for a one stop shop for annual financial information, I have come
up with the following:

NVL
DFCU
UCL
SBU
BOBU
BATU

It does not contain any financials, this lists all companies on the exchange.

It may in future be good for obtaining news about companies, sadly there is no Google alerts for it.

The boom from Oct to Dec

There was a sudden and sharp rise in share prices on several counters for the
period Oct - Dec 2007.

Witness the following:
dfcu 400 to 700 75%
nvl 425 to 1150 170%
sbu 140 to 230 64%
ucl 3700 to 5255 42%

If we put that in annual terms:
dfcu 300%
nvl 680%
sbu 256%
ucl 168%

Hows that for a return? I am almost kicking myself why I didnt start in August, I would
probably been up 150% !

The real mystery here is what happened in those months?

Ok, so NVL reported fair results, what about the rest? I suspect it was our neighbours Kenyans
moving into the Ugandan market in preparation for thier own elections in December which turned
out rather badly as seen by the rioting early this year.

Price information from mbea stock brokers website who have by far the best reporting of all brokers
in the country -- kudos to them, I may yet move to investing with them.

Some sucess securing information from Uganda Securities Exchange

I took a stroll to the USE library and spent quite abit of time trying to locate any
annual reports there.

I wish they would publish this information on thier site or give pointers to where it could be found.

Currently in my posession are soft copies of half year results for june 2007 for the following companies
1. Dfcu
These are trying to integrate thier leasing business which thier banking operations and this is hoped to be
complete this year. The business has had a pounding because of thier forex positions with respect to the dollar.

2. Bobu
No website.
Showing increase interest in lending to the public as opposed to treasury bills and bonds. They are also putting in a new banking
system to replace the one they have now.

3. Nvl
Want to start a tv station as well as radio station; should be fully operational by now. There seems to be alot of
excitement about thier share price at the momemt.

4. Sbu
Website seems to be south africa specific with regard to investment.
What can I say, they continue churning out profits though I think the share price is already ahead of itself.

5. Ucl
Sadly my data is from Dec 2006 - no website. Have completed rights issue which generated alot of excitement.

6. Batu
I have never suceeded getting any information here, though the share price jumped from 300 in October to 780 in December on rumours of return to profitablity.

Starting out investing in Ugandan Stock Market

Today,much to my distress, I seem to be failing to find current annual reports on the various companies
trading on the Uganda Securities Exchange http://www.use.or.ug

I have been considering starting an annual financial report swapping website but wonder if there is
interest in this.

If you are interested in swapping reports, please holler!