Uganda: Batu Remains Bearish On Low Stock Demand

Source from:  The Monitor (Kampala) 15 August 2008 08/18/2008

Share prices rise and fall. The latter is clearly lingering around the trading counter of British American Tobacco at the Uganda Securities Exchange waving losses at some investors. The share price of the tobacco leaf exporter has continued to decline in the last four months after a short lived record breaking ascent. Batu has dropped to Shs1, 160 as of August 12, from Shs1, 500 in April, on the back drop of the diminishing demand for the stock at the stock market. In the first quarter, Batu's share price gained momentum hitting record highs, up from Shs780 at the start of the year, as a result of improved investor confidence in the stock. In March, Batu announced that it had amassed Shs6.1 billion profit after tax (Shs3.3 billion), in the 12 months to December 31, 2007 after losing Shs10.1 billion in its 2006 operations. Excited investors dashed to buy the stock with hopes of making a kill from the stock but that exhilaration could by now be burnt out for the short time investors. Batu has about 1,500 retail and institutional shareholders including, Crane Bank, Barclays Uganda Nominees Limited, and National Insurance Corporation. Mr Rumbidzayi Nyabadza, General Manager Renaissance Capital said, for the share price to turnaround again, investors still need to be assured of sustained good performance by the Batu. "The current price movement is reflecting some expectation on the part of investors and more importantly the lack of demand for the stock at present," Mr Nyabadza said. He added that investors in the company have to critically look at the company's 2008 half year results to asses its performance in order to gauge its direction. A persistent descent, in the company's share price will leave those investors who bought the stock as it rose, during the first quarter of this year- for speculators who thought they could reap form the stock in short time. "If the Batu price continues downwards it erodes shareholder value and for those investors who bought at 1400, they would be in a loss position," Mr Nyabadza noted. Adding that shares are long term investments and we are of the view that the stock will do well in the medium to long term. "The temporary price dips are normal with share prices," he said. Batu was called upon to prove consistency in delivering performance that will cut it out as a blue chip, in order for it to create the necessary market for shareholders. An improvement in Batu's share price in the near future could be influenced by its impeding half year results. According to Ms Cathy Adengo, the corporate and regulatory affairs manager at Batu, said the results are scheduled to be announced at the end of next week. Commenting on Dfcu Limited's stock which has in the recent months equally turned bearish, Mr Nyabadza said, "Dfcu seems to have grown to its max price potential (especially for short term investors) unless it can spell out new growth in the half year 2008 results as other banks have. The bank has created new lucrative products (land loans) and is opening new branches but this is yet to be seen in the numbers." On Wednesday, Dfcu Limited and Bank, announced a 60 percent rise in profit to Shs6.1 billion accruing from Shs24 billion revenue, according to the company's half year results for the year ending June 30th 2008. The profits were boosted by an increase in customer deposits which swelled by 45 percent to Shs199 billion as compared to the June 2007 results. Mr George Mortimer, Managing Director, Dfcu Ltd attributed the company's strong growth, to the company's integration of Dfcu Limited and Dfcu Bank, in March this year. If the company's potential investors are to base their judgment on its half year performance, Dfcu's share price could gain some weight in the short term. Enditem