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The East African : February 24th 2014
60 FEBRUARY 22-28,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,836.25 -0.05% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,901.44 -1.91% USE All Share Index Uganda 1,387.00 -2.91% RSE All Share Index Rwanda 142.67 1.34% JSE All Share Index South Africa 47,342.59 1.46% NGSE All Share Index Nigeria - 38,536.53 -0.60% Bank of Ba≥oda, UCL sha≥e p≥ices slump T he pendulum is swinging at the Uganda Securities Exchange (USE), sending some shares out of fashion in the eyes of investors. Share prices for Bank of Baroda Uganda and Uganda Clays Ltd (UCL) dropped to record lows this month amid fears over weak earnings for 2013 among retail investors at the Ugandan bourse prior to the start of this year’s reporting season. Meanwhile, demand for DFCU Ltd and Stanbic Uganda has surged, sending prices up and highlighting upbeat investor sentiments towards the two counters. Bank of Baroda’s share price averaged Ush100 ($0.04) last week compared with an opening price of Ush120($0.05) recorded at the beginning of this year. UCL’s share price oscillated around Ush20 ($0.008) in the same period, compared with its opening price of Ush30 ($0.012) in the first trading session of 2014. Stockbrokers anticipate these stocks will trade below last year’s closing mark for the rest of this month, a sign of widespread jitters among ordinary investors. Market watchers cite worries over weaker profits pro- lion ($11.4 million) from Ush31 billion ($12.6 million) during the same period, while total operating expenditure rose from Ush26 billion ($10.6 million) to Ush34 billion ($13.8 million). “The bank’s forecasts for Workers at Uganda Clays Ltd. The firm’s share price hit a record low this month at the Ugandan bourse. Picture: File jected for Bank of Baroda in its full year results for 2013, due to high funding costs and muted growth in lending activity in the banking sector last year. These sentiments have prompted some retail investors to exit the counter in search of better stock options. Though many banks are currently winding down expensive deposits picked up in 2011, Bank of Baroda’s interest expenses are likely to remain high for the period ending December 2013 due to larger volumes of costly funds mobilised two years ago when compared with its peers. However, its bad loan expenses are expected to remain lower than those of its peers due to a smaller, high quality loan book, analysts said. The bank’s half-year profits after tax declined to Ush13 billion ($5.3 million) at the end of June 30, 2013, from Ush17 billion ($6.9 million) in June 2012. Interest income earned on loans and advances fell to Ush28 bil- Bank of Baroda’s share price averaged $0.04 last week compared with last month’s $0.05 2013 remain weak due to lower growth in interest incomes and higher funding costs recorded in the first half of 2013. These factors have caused significant selling appetite among small investors. I expect the counter to trade below Ush120 ($0.05) while UCL is likely to trade in the range of Ush20 ($0.008)Ush25 ($0.01) for the rest of this month,” said Arthur Nsiko, a research analyst at African Alliance Uganda. Though restructuring gains at UCL have directly boosted its earnings since 2012, flat growth in sales turnover attributed to slow recovery in the construction sector despite falling lending rates has weighed against profits. Operating expenses, particularly running costs for standby generators during load shedding intervals, have also risen. Faced with a half year loss of Ush13 million($5,289) in 2013, investors remain nervous about the firm’s growth outlook. Kenya now licenses two new oil and gas explo≥e≥s THERE IS new money in town. Kenya has licensed a partnership of two international companies to explore crude oil and natural gas amid reports of higher commercial oil deposits than earlier predicted. The Ministry of Energy has approved Compañía Española de Petróleos (CEPSA) of Spain and Milio International of Dubai as new partners in exploration areas in northwestern Kenya and at the Coast. Taipan Resources, a Canadian oil and gas company with prospecting rights in northern Kenya, released fresh projections last week, saying that the Mandera explora- tion basin could have as much as 1.6 billion barrels of crude. The revised estimate theoretically raises to 2.6 billion barrels the oil deposits in northern Kenya, when added to British firm Tullow Oil’s estimate of one billion barrels of crude in the Tertiary Rift basin. Appraisal of the Kenyan discoveries is expected by next year or 2016, with first oil expected around three years later. All this is making the exploration business look more attractive than before. State-owned CEPSA will now acquire a 55 per cent stake in area 11A from EHRC Energy Inc and Milio International Ltd will take 60 per cent of the onshore part of acreage L6 from FAR Ltd of Australia by funding future exploration work. CEPSA will later this year participate in mapping out potential oil and gas deposits for well drilling. The acquisition of the acreage marks CEPSA’s first venture into exploration in East Africa as the firm seeks to diversify the firm’s portfolio. The Spanish firm hopes to drill its first well before September 2016. ERHC of the US will have a 35 per cent stake in area 11 A with National Oil Corporation Kenya holding 10 per cent equity. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Centena≥y joins banking switch system THE ENTRY of Centenary Bank, Uganda’s largest microfinance lender, into the local banking switch platform last week marked a big turning point for switch operator Interswitch Uganda after a decade of frustration trying to enlist big banks wary of its business model. Large banks that have for years invested heavily in standalone systems. Centenary Bank’s inclusion brought the number of participating institutions on the local switch to 38, with 133 automated teller machines and roughly a million users. It seems the shift in focus from investment in ATM locations to provision of value added services is beginning to pay off for Interswitch, with other big banks willing to embrace the platform. The exit of Barclays Bank Uganda from the interbank switch seven years ago underscored low appreciation for the platform among big banks unimpressed by its weak shareholder and infrastructure base, which consisted of fewer than 10 ATMs at its launch in 2004.
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