Umeme share price flat on stock market debut

The share price posted a high of Shs295, before falling to Shs270, five minutes to the close.

Kampala

The Umeme share price closed Friday on a flat rate of Shs275 as the power distributor made its debut on the Uganda Securities Exchange (USE).

The debut share price weighted average of Shs275 was the same amount the power vendor sold its share during the Initial Public Offering (IPO) period, which closed on 7 November.

Before closing the day, the share price rose by 7.4 per cent to Shs295 during the course of trading before falling to Shs270. The Shs270 offer came in as the final deal with the market having less than five minutes to close for the day. An outstanding 12.3 million shares was on offer, however, the counter did not register outstanding demand.

Weighted Average Market Share is the sum of total of transaction turnover divided by the total number of shares transacted at any particular day. While the closing price is the value of the share registered at the time of the market’s closure.

However, market analysts insist it is still too early to call as a single day’s activities cannot give wholesome picture of the shares’ profitability.

Mr Robert Katabaire, a dealer at Dyer and Blair, said the performance of Umeme shares on day one was affected by speculators who had anticipated quick returns on the firm’s debut on the secondary market. “Friday was filled with speculators who wanted to exit the market. The actual position of the market can only be seen tomorrow [Tuesday]. There is nothing to worry about, the Umeme share is good and am hopeful it will perform,” Mr Katabaire said.

Additionally, another market expert who asked not to be named because of being a financial advisor to Umeme, said: “It is hard to have an insightful analysis in a single day. We can only analyse Umeme performance on the exchange after about two weeks.”

Umeme shares trading on the secondary market followed the conclusion of its initial public offering (IPO) that ran between 20 September and 7 November. The results released by the power distributor reported the IPO was oversubscribed by 36.9 per cent.

Umeme debut price: A view from an expert

Mr Patrick Mutimba, the Makerere University director for investments, says Umeme’s shares will be a profitable venture, especially in the long-run.

Mr Mutimba, told Daily Monitor, last week that the flat price registered by Umeme on its debut at the exchange was a normal trend as there rules that govern market adjustment levels.

“Of course some people expected to have a quick return on investment, given the mixed publicist the IPO received.”
“The category above is now thinking they made an investment mistake basing on what transpired on Friday [day one.”
He adds: “The allotment results show a number of institutional and international investors were given fewer shares than they actually applied for, however, while some retailers may be thinking they made a mistake the international buyers left out might be waiting for a further fall to take advantage of situation.”

He notes that while Umeme has not paid any dividend to shareholders in the last five years, its prospectus shows that money raised from the IPO will partly clear a shareholder loan which is likely to free the company of a burdensome shareholder’s loan.

“This, he says, ‘with the loan cleared, Umeme might be able earn a profit. This will enable the power distributor to pay dividends to shareholders but this is likely to come in the long run. That is what big investors lookout for.”