Another prospect for Rwandans to invest in cross-listing Kenyan firms
Rwandan investors will have another opportunity to expand their investments regionally when three more Kenyan firms finalize plans to cross-list their shares on the Rwanda Stoke Exchange (RSE).
Robert Mathu, the executive director of Capital Markets Authority told The Rwanda Focus that Equity Bank, Centum and KenoKobil are working on the paper work to cross-list on the local bourse.
Cross-listing is when a company, already listed at home, lists its shares on foreign markets. Two Kenyan companies—KCB and Nation Media Group (NMG) are already cross-listed on RSE.
When the three firms actually come, the RSE will have more foreign than local companies. Only two local companies—Bank of Kigali and beer manufacturer Bralirwa are listed on RSE.
Mathu says that the coming of more Kenya companies is an indication that Rwanda is attractive to foreign investment. “Having more foreign companies listed on the stock exchange than the local companies is not unique because it shows that the stock exchange has attracted more foreign businesses than domestic ones,” he said.
He said this presents opportunities for Rwandan investors to widen their investments.
Equity Bank could be the most exciting of the three as it’s one of the most profitable companies in East Africa with presence in Rwanda, Kenya, Uganda, South Sudan, and Tanzania.
Since going public in 2006, Equity Bank’s shareholder value has grown significantly.
The bank that in 1993 had only 27,000 customers now has 7.8 million accounts. It claims over 50% of all bank accounts in Kenya and has shareholder’s equity of $336.7 million. The bank has assets estimated at $1.5 billion as of June 2010.
In July, Equity Bank reported a 29% growth in revenue after tax to Kshs7.62 billion in the six month ending June 30, 2012 despite the challenging micro-economic environment characterized by high inflation, interest rates hikes and foreign exchange volatility.
KenolKobil Ltd, a top marketer of lubricants in Kenya, also presents good business prospects. The company has a huge business presence with flagship brands Kobil, Kenol and Castrol oils dominating the Kenyan market.
In June, this year, the value of its shares jumped by 9.1% on the Nairobi Stock Exchange (NSE)—the highest in more than a decade.
The bank that in 1993 had only 27,000 customers now has 7.8 million accounts. It claims over 50% of all bank accounts in Kenya and has shareholder’s equity of $336.7 million.
Centum Investment Company Limited is the largest quoted investment company in East Africa listed on NSE with over 38,000 shareholders.
Centum is currently valued in excess of $140 million and consists broadly of investments in private equity, listed equity and real estate and the private equity portfolio is the largest asset class, with notable investments in the financial and beverage sectors.
Despite a big presence of foreign companies, trading on the RSE is however often dominated by local companies.
Mathu attributes this to the challenges in the clearing and settlement mechanisms between markets in the region.
“Both RSE and NSE have each access to a central depository. However these two depositories are not interconnected,” he said.
A central depository system refers to electronic software that converts physical paper certificates, be they shares or other debt and derivatives representative of ownership of securities. The case for low secondary market activity is common across all stock markets that have cross listed shares.
“This challenge is being addressed at the regional level and all the central depositories have agreed to integrate their depository systems by way of allowing transfers of securities between different depositories. This will activate cross border secondary trading,” Mathu said.
But local investors have also found shares of NMG very highly priced, a factor that has also in a way hindered business.
But another official at the RSE explains that it’s a market phenomenon that can’t be blamed on NMG.
“While it is true that their shares are pricy, this is because the market has valued the company that high over the years. This price is not decided by NMG but by the market in the same way that the domestic companies on the RSE are currently trading at prices above their IPO prices,” explained the official.
Nation Media group shares last traded on the RSE at Frw 1,200 per share.
An official of the NMG, Rwanda who spoke on condition of anonymity because he’s not an official spokesperson of the company said; the company is a regional media house and cross listing is part of its strategy to be present all markets in the region.
He added that low prices would also be in the company’s interest as it would enable its shares to be actively traded in all the markets to raise more capital.
“Remember we are a media distributor and the more people we have the more familiarity is created in the market which is the customer base. Simply put, our aim is to get as many Rwandan investors as possible (hence we can’t over price our own shares as it would be self defeating),” he said.