Business Daily (Nairobi)
David Mugwe
23 December 2011
The Dar es Salaam Stock Exchange (DSE) has capped the year with two new listings, following this week’s admission of Precision Air and the December 7 cross-listing of African Barrick Gold (ABG) on the Tanzanian bourse.
Shares of Tanzania’s largest carrier, which Kenya Airways partly-owns, started trading at the Dar es Salaam bourse on Wednesday, bringing to end an initial public offer (IPO) that opened on October 7.
The airline’s share went up by Tsh20 (Sh1.05) on the first day of trading to Tsh495 (Sh26) with 6,000 shares changing hands.
The Precision Air share sale, which recorded a 42.3 per cent subscription from 6,667 investors could have seen Kenya Airways stake drop to 34.13 per cent from 49 per cent.
The Dar es Salaam bourse said that the new shares added a total market value of Tsh92.08 billion (Sh4.8 billion) bringing the total equity market capitalisation of DSE to Tsh11,573.18 billion (Sh607.84 billion). “The listing of Precision Air brings to a total number of 17 listed companies at the exchange,” said the DSE in a statement, released at the close of trading on Wednesday.
Precision Air IPO, which was open to all East African residents subject to foreign investor restrictions in Tanzania, raised Tsh11.84 billion (about Sh623 million) of a targeted Tsh28 billion (Sh1.5 billion) if all the 58,841,750 shares on offer had been taken up at Tsh475 (Sh24.95) each.
The under subscription was blamed on factors including the share offer price, the sale of Tanzania Breweries shares, which started at the end of Precision Air’s offer and delays in getting approvals from Kenya’s Capital Markets Authority.
“Valuation and pricing of the stock during the IPO stage was one of the factors for low demand, but now being listed, the market will be able to tell if this was factual,” said Moremi Marwa, chief executive officer, Tanzania Securities Limited.
Mr Marwa said that the level of liquidity on the counter going forward would depend on investors’ appetite for the stock although there was a relatively general low demand during the IPO. He said that notable activities on the counter may not be evident in the short-term, given the current turbulence in the financial markets in the region where fixed income instruments are currently performing better than some equities.
“The company has growth prospects and long-term investors will keep their shares. Speculators may sell if the share doesn’t appreciate much,” said Godfrey Gabriel an investment and research officer at Orbit Securities.
ABG, Tanzania’s largest gold producer and one of the five largest in Africa two weeks ago cross-listed its 410,085,499 shares, which trade at the London Stock Exchange (LSE), bringing the number of cross-listed counters to six. Five firms — Nation Media Group, KCB Group, Jubilee Insurance Holdings, East African Breweries and Kenya Airways — which are listed at the Nairobi Securities Exchange, are cross-listed at the DSE though they rarely make daily trades.
Investing in ABG shares at the Dar es Salaaam bourse requires an investor to buy them at the LSE then convert them to depository receipts issued by the DSE. No trade has taken place on this counter since the listing with Mr Marwa attributing this to “normal market sentiments”.
“There are other counters at the DSE whose stocks have not changed hands since then — again it might be part of the usual trend in which most of the cross-listed stocks have not witnessed transactions at DSE,” he said adding that investors may not be having adequate information on cross-listed counters.
ABG said that its decision to let its share trade at the bourse was mainly to enable Tanzanian investors to participate its vision and enhance its profile in East Africa’s second largest economy.
“Investors from East Africa are allowed to participate but with the foreign investors regulation requirements,” said Mr Marwa who added that retail and institutional investors have relatively equal chances and will follow the same process of participation on the counter.
The illiquidity of cross-listed shares has also been blamed on the fact that central depositories in the region are not linked and that not all shares have been deposited into electronic accounts.
The East African Securities Exchange Association this month said that it was working on a proposal to link the central security depositories of all member countries, which is expected to usher in the era of seamless trading of shares and bonds listed in the regional markets.
It is anticipated that commencement of the inter-depository mechanism will be at the end of the first quarter of 2012.
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