What to make of the NIC IPO
Uganda’s largest insurance firm, National Insurance Corporation Limited, is offering close to 40 percent of its shares to the public at a cost of Shs 45 per share. The IPO which opened on December 31 is closing on February 5 but with hardly two weeks to the close there isn’t the usual interest and excitement that marked east African IPOs of 2008 and 2009.
There are four factors that could account for the cool public reception to the IPO, namely:
i. Slow publicity. Although the IPO officially opened on December 31, 2009 the prospectus was not available to the public until about January 6, 2010. This meant investors did not have any information to base their decision on for a whole week. It was again another week after the prospectus came out before any brokerage firm issued its analysis of the IPO. In the meantime the only publicity some of us saw was the newspaper articles from the privatisation unit.
ii. The MUASA factor. The Makerere University Academic Staff Association (MUASA) has been making shrill noises about a dispute between itself and NIC. An investor lacking information could easily imagine the amount claimed by MUASA is so significant that it would it jeopardise the health of NIC especially when you consider the sparing way in which information is forthcoming from NIC and others responsible for promoting the IPO.
iii. The Safaricom recoil. Most investors are yet to recover from the loss and dashed expectations suffered at the hands of the Safaricom IPO last year. Speculators who want to make a quick profit are understandably recoiling from the NIC IPO fearing a repeat of the Safaricom experience where the share has traded below its IPO price for most of the time.
iv. Uncertain balance sheet of insurance firms. Insurance firms deal in risk and there is no shortage of risk in the economy both locally and internationally. Nobody is praying for a helicopter insured by NIC to go down but investors will be keen to know if NIC has any risk concentration that could hamstring its health as a business.
The above factors notwithstanding, there are several reasons why investors should take a closer look at the NIC IPO.
The income statement of NIC in the last 3 or so years have been fairly good. The company has been making a respectable profit and has good prospects of growing its income further. The company has also been having a strong cash flow which has enabled it to pay handsome dividends to its shareholders. If you are investing because of dividends then NIC is a candidate to consider.
NIC is certainly not a speculator’s best option but if you are ready to wait for three years or more then it is a good company to invest in. The business has prospects for further growth and would only be hindered by greed or something like that seizing its management and board of directors.
I am reliably informed that the MUASA factor should not be a matter of great concern because the money being claimed is well within the figures provided for by NIC in its balance sheet. Besides the concerns expressed by MUASA can only be good for NIC because the board and management know they are under great scrutiny and must put their best foot forward at all times.
From a nationalistic perspective if Ugandans do not buy all the shares offered, the foreign strategic investor is waiting to pounce on them and increase their stake in the firm. so what you make of the NIC IPO is your choice but it is a choice better made after studying the prospectus and speaking to your broker or investment advisor.
James Abola is a business and money coach. Email: james.abola@akamaiglobal.co.uk
There are four factors that could account for the cool public reception to the IPO, namely:
i. Slow publicity. Although the IPO officially opened on December 31, 2009 the prospectus was not available to the public until about January 6, 2010. This meant investors did not have any information to base their decision on for a whole week. It was again another week after the prospectus came out before any brokerage firm issued its analysis of the IPO. In the meantime the only publicity some of us saw was the newspaper articles from the privatisation unit.
ii. The MUASA factor. The Makerere University Academic Staff Association (MUASA) has been making shrill noises about a dispute between itself and NIC. An investor lacking information could easily imagine the amount claimed by MUASA is so significant that it would it jeopardise the health of NIC especially when you consider the sparing way in which information is forthcoming from NIC and others responsible for promoting the IPO.
iii. The Safaricom recoil. Most investors are yet to recover from the loss and dashed expectations suffered at the hands of the Safaricom IPO last year. Speculators who want to make a quick profit are understandably recoiling from the NIC IPO fearing a repeat of the Safaricom experience where the share has traded below its IPO price for most of the time.
iv. Uncertain balance sheet of insurance firms. Insurance firms deal in risk and there is no shortage of risk in the economy both locally and internationally. Nobody is praying for a helicopter insured by NIC to go down but investors will be keen to know if NIC has any risk concentration that could hamstring its health as a business.
The above factors notwithstanding, there are several reasons why investors should take a closer look at the NIC IPO.
The income statement of NIC in the last 3 or so years have been fairly good. The company has been making a respectable profit and has good prospects of growing its income further. The company has also been having a strong cash flow which has enabled it to pay handsome dividends to its shareholders. If you are investing because of dividends then NIC is a candidate to consider.
NIC is certainly not a speculator’s best option but if you are ready to wait for three years or more then it is a good company to invest in. The business has prospects for further growth and would only be hindered by greed or something like that seizing its management and board of directors.
I am reliably informed that the MUASA factor should not be a matter of great concern because the money being claimed is well within the figures provided for by NIC in its balance sheet. Besides the concerns expressed by MUASA can only be good for NIC because the board and management know they are under great scrutiny and must put their best foot forward at all times.
From a nationalistic perspective if Ugandans do not buy all the shares offered, the foreign strategic investor is waiting to pounce on them and increase their stake in the firm. so what you make of the NIC IPO is your choice but it is a choice better made after studying the prospectus and speaking to your broker or investment advisor.
James Abola is a business and money coach. Email: james.abola@akamaiglobal.co.uk
Comments
Post a Comment
It helps all of us if you indicate your email address when making a comment.
Thank you. Akamai Global