NSE in listing drought as three firms exit bourse

 

An investor monitors trading on the electronic board at the NSE. Photo/File 

By GEOFFREY IRUNGU

The Nairobi Securities Exchange (NSE) ends the year having recorded one delisting, while two companies that are the subject of buyout bids could also follow on the same route.

Telecommunications firm AccessKenya delisted following a buyout by a South African company; while CMC Holdings and Rea Vipingo Plantations (RVP) are going through takeover motions.

The only new firm to be listed on the NSE this year was Home Africa, while I&M Bank joined the bourse through a reverse takeover of City Trust, an investment firm.

The long listing requirements, often taking several months, are often cited as the reason behind the drought in new issues.

Aly-Khan Satchu, who owns shares at the NSE and is also an investment analyst, said in November that delisting had become a trend on NSE’s agricultural sector, noting that Unilever Tea had done the same.

Monumental task

The NSE had hoped to use the Growth and Enterprise Market Segment (GEMs) to scale up the number of new listings from the small and medium enterprises (SMEs).

It has, however, proved a monumental task for the bourse, with only Home Africa having been listed within the one year since the segment was launched.

In May this year, Amish Gupta, an executive director at Standard Investment Bank, said the period of between two and four months it takes to prepare a company for listing is among the reasons listing on GEMs has been slow.

NSE chief executive Peter Mwangi said economic growth would encourage more companies to list on GEMs.

Early this month, the World Bank estimated GDP growth will be 5.0 per cent this year having reduced it from the 5.7 per cent estimated in July on account of low government spending.

In 2014, the NSE expects to list itself having failed to do so this year due to pending resolution of issues such as fees for trading rights.

The listing pipeline is basically empty though, showing that regulators may have to find new ways to encourage listing.

Commentators have voiced concerns that some of the firms trading on the NSE appear undervalued, making them subjects of takeover bids.

Mr Satchu has labelled valuations of agricultural as “egregious,” saying they do not reflect the expected relationship with their price-to-earnings ratio and net asset values.