On the Equity Market | Stock Analysis 30-March-2012

Market turnover this week was up 3.9% to UGX 154.2m with SBU as top trader, generating 60% of the turnover. Uganda Clays rallied 14.3% to UGX 40, while BATU was up 10.3% to UGX 2,095. The company (BATU) gave out an attractive dividend of UGX 222, up 97%. The ALSI was up 3.8% TO 990.12 and the UGX closed the week at 2,500.

British American Tobacco Uganda published results for the year ended 31 Dec 2011, with revenue up 5% to UGX 11.5bn, operating profit up 22% to UGX 7.1bn while dividend grew by 97% to UGX 222 per share. Revenue growth benefited significantly from cigarette sales volumes by 20% due to the strong performance of their flagship brand, Sportsman; and Maintenance of cigarette selling prices in spite of a 13% weighted average increase in cigarette excise taxes during FY11. Tobacco leaf exports benefited from a weaker UGX though the export shipment volumes were lower by 23% principally due to the current global over supply of tobacco.

The Central bank will sell two- year bonds worth UGX 100bn (USD 40.2m) in an auction next Wednesday. The bonds will carry a coupon of 10% and will mature on 27 March 2014. Analysts reported that yields on Ugandan debt have bottomed out and are likely to inch up after a slide following the Bank of Uganda’s cut in interest rates last month. Yields at the auction last Wednesday rose on all tenors with the 91 day paper edging up to 17.4% from 17.2% a week earlier. Two year tenor bonds were last sold in Dec-11 returning a weighted average yield of 20.9%.

As more entities continue to position themselves to tap into Uganda’s oil, local insurers have formed a syndicate, which will help the sector to win huge contracts that come with offering cover for oil companies. The Uganda Insurers Association reported that the oil pool would assist insurers to mobilise financial capital and acquire expertise to increase its penetration. Each insurance company in the market has agreed to contribute USD 100,000 (UGX 24m) to the syndicate as capital to enable the association to raise at least USD 2.5m, which it intends to use in acquiring a loan to enable it write all risks in oil business once exploration and refinery starts. The oil sector is a much specialised sector and the sum of insuring risks is extremely high, individual insurers cannot even write more than 10% of the risks because they don’t have adequate capacity. Uganda’s insurance penetration is estimated at below 1%, the lowest rate in the region.