Bad start for Uganda’s stock market

Commenting on CQCIL performance, Bwiso said that their observation is that it is the small investors who are trading due to their need for cash to exit. This scenario, he said has seen them get priced down by the different market players.

He also said that after the company announcing poor financial results on the USE for the year 2019, many investors could have chosen to wait for good results before investing in the company.

The company’s maiden full-year results as a listed company on the USE were weighed down by disappointing FY2019 earnings. Profits plunged 84.79% due to reduced sales to Global Fund (GF), higher cost of inputs and the price competitive anti-malaria (ACTs) and antiretroviral (ARVs) market.

The company’s results fared poorly compared to last year with return on assets free-falling to 4.03% while return on equity dropped to 2.36% in 2018.

Earnings per share weakened to Shs1.86 ($0.0005) down 84.79% from Shs12.22 ($0.003) in 2018.  The company’s net asset value per share also slipped to Shs46.09 ($0.012) compared to Shs47.67 ($0.013) in 2018.

The company’s management hope to bounce back after securing a tender awarded by U.S President’s Malaria Initiative (PMI) for the supply of anti-malarials to an undisclosed African based manufacturer.

In relation to Umeme, Bwiso said the conversation around its license renewal remains one of the factors for its current performance on the USE. In addition, Bwiso said, there are few institutions who are willing to buy at the current market price now viewed as unattractive.

He also said that most investors could have preferred to wait and see how the year ends for the company before making key investment decisions.

He also said that there are investors who came in at the Umeme IPO whose investment horizon has reached and are exiting the market.

Asked to explain what the USE management is doing at the moment to bolster trade on the market Bwiso said:

“We are actively engaging companies at management level to find out how their needs are and how we can support them to thrive. Creating awareness is key. We are also introducing a training division for the public to learn how the market operates and create more awareness.”

Bwiso said the USE remains an important platform for companies to raise capital and expand their operations.

He explained that whereas investors with capital are willing to invest in companies and earn dividends with the positive outlook of the capital gain, access to capital at listing time and continuing to raise capital through rights issue from shareholders or capitalising the reserves by bonus issue, creates a big opportunity for companies.

The other opportunities are that listed companies have an opportunity to attract high skilled staff, a well constituted Board of Directors that can guide company operations to achieve good growth.

He also said listing at the USE still gives chance to companies to have diverse shareholders, operate a more transparent and open business that is well regulated by the capital markets authority.

Market analysts such as  William Nyakatura, a former employee at African Alliance and now working for Kinsman Advisory concurs with Bwiso and his team on the idea that they have put in place a robust infrastructure for companies to list, raise capital and expand their operations.

Nyakatura told The Independent that extra effort to market the USE must be put in by stock brokers that meet investors regularly.

“…for now, people are buying stocks at their leisure, price,” Nyakatura said.

Market problems

However, Nyakatura said companies like CQCIL are not doing well because management has not done enough to cut operational costs.

On Umeme, he said, its performance has been fairly good over the years and shareholders have been earning dividends in addition to the company meeting performance targets set by Electricity Regulatory Authority.

“Shareholders of Umeme have got to be content with the company performance,” Nyakatura said.

Generally, he said that there are more attractive investment platforms in foreign markets where most investors are choosing to invest instead of concentrating on the USE that is still struggling to be active.

Going forward, he said companies like CQCIL have got to do more marketing for their products in new and old markets so as to increase sales and become profitable.

The other option for CQCIL, according to Nyakatura, is to hold the good premium price for its products, and find premium clients/governments who are willing to pay that premium price.

To shareholders, Nyakatura said: “I would rather be patient on a company whose earnings are growing than one whose earnings are declining.”

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