Business Daily (Nairobi)
David Mugwe
11 December 2011
High investor interest in Uchumi Supermarkets’ stock has won the retailer a slot in the price indicative NSE-20 Share Index, marking an important turn-around for the firm whose five-year suspension from the bourse ended on May 31.
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Uchumi took the place of motor dealer CMC Holdings, whose shares were suspended from trading at the Nairobi Securities Exchange (NSE) on September 27 to pave way for investigations on alleged fraud at the firm.
Chief executive of the bourse, Peter Mwangi, announced the change on Friday.
“Uchumi emerged the best qualified company for inclusion as a constituent in the NSE-20 Share Index,” said Mr Mwangi in a statement following approval of the move by the board of the exchange.
Listed firms are selected for inclusion in the index based on their market capitalisation, shares traded, number of deals, and turnover during the period under review.
The CMC share traded at an average of Sh12.90 just before the initial seven-day suspension in September following a public spat between newly appointed CEO, Bill Lay and a section of the board of directors.
The Capital Markets Authority (CMA) later extended the suspension of trading of the car dealer’s shares for an additional 90 trading days from September 27 following the lapse of the first seven say suspension.
Stella Kilonzo, the CMA chief executive officer said that the extended suspension period was expected to facilitate ongoing investigations by CMA of allegations relating to CMC Holdings’ conduct of its affairs and to sustain investor confidence in the capital markets.
The extended suspension is expected to lapse on January 23 next year.
Uchumi Supermarkets, whose shares had been barred from trading since June 2006 after the supermarket chain got into financial trouble, resumed trading at the NSE this year.
The company, which has since turned a profit, has however seen its share price drop from Sh14.50 – where it closed before the 2006 suspension – to Sh6.70 as at the close of business on Friday.
Over the five months that the share has been trading, Uchumi has hit a high of Sh15.70 and a low of Sh6.50.
Uchumi Supermarkets has 265.4 million shares issued meaning that its value, as measured by market capitalisation stood at Sh1.778 billion compared to CMC’s 582.7 million shares whose market capitalisation stood at Sh7.887 billion at the time it was suspended.
Renaldo D’Souza, a research analyst at Genghis Capital said that since the index is price weighted, the full impact of the replacement will be more noticeable when the market turns and prices start going up and both volumes and turnover increase.
“One has to look at factors such as the price volatility, volumes traded and the free float (freely traded) shares,” he said.
Although the market capitalisation of Uchumi is lower than that of CMC, the NSE periodically reviews stocks in the index, a screening criteria and a weighting methodology to make sure that shares in the index reflect general price movements at the NSE.
Other companies included in the index are Mumias Sugar, Express Kenya, Rea Vipingo, Sasini, Kenya Airways, Safaricom, Barclays Bank, East African Breweries among others.
dmugwe@ke.nationmedia.com
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