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Tuesday, January 30, 2007

Consider splitting, NSE urges Mumias

The Nairobi Stock Exchange (NSE) asked the management of Mumias Sugar Company’s to consider splitting its shares, moments after the sugar-miller’s 92 million shares started trading at the bourse.
NSE chairman Mr Jimnah Mbaru said a share split will make the firm’s shares affordable and more attractive to retail investors such as farmers.
Mbaru said that despite being one of the blue-chip companies in the market, the price of the company— which opened on Monday at Sh49 per share — had moved beyond what retail investors could afford.
If effected, the split would follow the footsteps of ICDCI, Barclays Bank, East African Breweries, Sasini Tea & Coffee, and EA Cables.
"We think that a split in Mumias shares will make it more affordable. The company could consider to institute a 1 to 5 share split to stimulate further trading in the shares and thereby make it easier for farmers to acquire such shares," he said.
Mr Amish Gupta, a member of the DSC Consortium that was the lead sponsoring stockbrokers’ group urged the Capital Markets Authority (CMA) to allow the use of ‘global refunds’ to authorised selling agents for onward credit to their investors.
Gupta argued that the role of the receiving bank and receiving agent in other offers should be directly regulated through appropriate regulations and licensing procedures.
The sale of the 18.04 per cent stake of the Government’s stake in Mumias was the fourth initial public offer in the last ten months at the NSE. It follows the Kenya Electricity Generating Company (KenGen), Scangroup, Eveready Batteries IPOs and the Diamond Trust bank’s rights issue.
In total, the Government has raised Sh12.403 billion during the period from the IPOs and a further Sh70 billion from the 18 government-sponsored Treasury Bonds (T-Bills) which were listed on the NSE Fixed Income Market Segment (FISMS) during the course of 2006.
"The capital markets therefore enabled the Government to meet two key policy planks for growing the economy-stimulating a savings and investments culture through the sale of equity holdings in state corporations of Kenya, expanding Kenya’s private sector and funding the budget deficit," Mbaru said.
Finance minister Mr Amos Kimunya rung the bell to officially launch the trading of the new Mumias shares. The share dealt 787,050 shares at between Sh45 and Sh50 Monday.
Mbaru said that based on past experiences, the financial markets had shown that there was room for new products. Specifically the NSE is ready to take up the forthcoming Kenya Re-insurance Corporation (Kenya Re), Safaricom Limited, Telkom Kenya and a further sale of the estimated 19 per cent of KenGen shares.
Mbaru suggested that CMA should introduce the need for under-writing of shares as a way of deepening the market. "We believe that if the CMA were to facilitate transaction advisors to use underwriting, it would enable more private sector issuers to come to the market," he said.
He urged the CMA to approve underwriting from 20 per cent of an issue. As the market develops and builds capacity, CMA should progressively increase the amount of an issue that can be underwritten up to 100 per cent of the issue.

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