NSE rights issues signal bumper year for stockbrokers

 

A broker trades at the NSE. KenGen, Uchumi and National Bank have received shareholders’ approval to issue more shares. FILE 

By GEORGE NGIGI

In Summary

• Power generator KenGen, retail chain Uchumi and National Bank have already received shareholders’ approval to issue more shares in cash calls.
• The rights issues could help a rebound for stockbrokers whose placement and advisory commission incomes suffered from a drought in new listings and few capital raising transactions last year compared to 2012.
• In 2012 stockbrokers earned more than Sh100 million from five rights issues by listed firms.

At least three NSE-listed firms have lined up multi-billion-shilling rights issues this year while others have announced corporate bond sales, signalling a potentially lucrative year for transaction advisers and stockbrokers.

Power generator KenGen, retail chain Uchumi and National Bank have already received shareholders’ approval to issue more shares in cash calls that could help a rebound for stockbrokers whose placement and advisory commission incomes suffered from a drought in new listings and few capital raising transactions last year compared to 2012.

In 2012 stockbrokers earned more than Sh100 million from five rights issues by listed firms.

The brokers and investment banks relied heavily on trade commissions last year as advisory and consultancy fees dropped by 32.4 per cent to Sh120.44 million as at June from Sh178.06 million same time in 2012 due to few advisory deals in the market.

“We have done bonds which would have replaced the rights issues and recapitalisation through take-overs,” said ABC’s corporate finance and advisory manager at ABC Capital Johnson Nderi.

I & M Bank, Housing Finance, Shelter Afrique and Jamii Bora are some of the players who issued corporate bonds during the year. I & M and Housing Finance are expected to tap more debt from their bonds in the first half of the coming year.

Kenya Airways, Standard Chartered Bank, DTB, NIC and CFC conducted rights issues in 2012, raising over Sh37.5 billion.

The market also hopes to see new companies list on the bourse during the year. Family Bank and UAP Insurance are some of the companies being closely eyed this year if they will offer their shares to the public.

UAP management had said it intended to have the share trading at the NSE by end of June this year. Currently both Family Bank and UAP are trading over the counter.

Commercial banks are expected to be active in raising funds as higher capital adequacy regulations come into effect mid-year.

“We expect 2014 to have more capital raising activities but it i not that fast because companies will want to first see their 2013 performance to know if they can raise internally through retention,” said senior investment analyst at EmExea Consulting, John Kamunya.

He noted that advisory firms had made money from private deals which included entry of strategic investors in different companies during the year.

Such deals include Fina Bank selling a 70 per cent stake to Guaranty Trust Bank of Nigeria and Interconsumer sale to French L’oreal.

During the year AccessKenya delisted from the stock market following its take-over by South Africa’s Dimension Data. CMC is also posed to exit the bourse if its shareholders accept Al-Futtam’s acquisition offer.

Only a few investment banks have the capacity to offer transaction advisory services, a situation that is likely to further widen the revenue gap between intermediaries that rely solely on brokerage commissions and those that have additional revenue streams.