Category Archives: NSE IPO

President pledges NSE Revival through IPOs

President William Ruto visited the Nairobi Securities Exchange (NSE) and rang the opening bell, then listened to financial and government leaders explain the situation in the financial markets.

  • NSE Chairman, Kiprono Kittony lamented that there had been no new government listings in 13 years. This stems from challenges and long procedures in the privatization process and they have had talks with Moses Kuria, the designated Cabinet Secretary for Trade, Investment and Industry,.
  • James Mwangi CEO of the Equity Bank CEO said his group was the ultimate hustler fund that grew from being a Nyagatugu village mutual fund, owned by 2,500 farmers. In 2005 and 2006 it converted into a bank and listed on the NSE which enabled them to then raise $185 million (Kshs 11 billion) from Helios. Today, the original investors have seen a 159,000% return on their investment and Equity, with Kshs 1.4 trillion of assets, has the sovereign fund of Norway (Norfund) and the World Bank Group as its largest shareholders.  
  • Lengthy Privations: Engineer Kinyanjui of the PPP said privatization as currently structured has 16-17 steps and each takes 5 months. The government owns Kshs 426 billion of investments (at the NSE) and can’t sell one share without going through a privatization law process. Entities like ICDC (now under KDC) have mature investments they are ready to exit from and support the government program and the delay in privatization means that when they divest, there is an erosion of value. 
  • Pension Opportunity: Hosea Kili, the Managing Director of Laptrust said the Lamu Port, SGR and Nairobi Expressway could have been financed by the local pension industry if they had been structured for them and lamented that they are unable to deploy funds as there are no new listings. He added that Laptrust plans to list Kshs 7 billion of their Kshs 17 billion property portfolio as an I-REIT. 
  • The National Social Security Fund (NSSF) boss said that 15 million Kenyans are not in any pension schemes. At the same time the NSSF, which has shares in 29 listed companies, is 3% of the NSE, has reached the limits of what it can invest in some counters.  

After listening to leaders, President Ruto said the government would revive the capital markets by privatizing and listing 5-10 state enterprises in the next 12 months and that the government would also seek to float a domestic dollar-denominated bond.

He directed that the government review of privatization law to review sections that inhibit the process, or he would move to repeal it. He also asked private companies to step forward and list and said the government was willing to remove some impediments including forgiveness of some tax sins. 

In his closing remarks, the President: 

  • Announced that Bio Foods and Credit Bank have obtained approvals to list at the NSE.
  • Invited the pension companies to a meeting at State House a few days later. 
  • He also put a fire under the boards of Nairobi International Financial Centre and the Privatization Commission for not delivering.

Here’s a stream of the launch of the enhanced NSE Market Place event

MTN Uganda IPO 

MTN Uganda has an ongoing IPO in which they plan to raise UGX 895 billion (US$252 million) from selling 20% of the company to local investors and floating the shares. Like in Ghana and Nigeria before, the listing of shares on the local stock exchange by the leading telecommunications firms in the countries, has become a licensing requirement, and MTN, which signed a new 12-year license in 2019, is doing this ahead of a June 2022 deadline.

Looking at the IPO prospectus, and extracts from an MTN executive briefing in Nairobi this week, some of the highlights of the offer are: 

  • About MTN Uganda: Founded in 1998, it is the largest of two telcos in the country with a 55% market share compared with 45%  for Airtel. It is the most admired brand in the country and part of the MTN Group that is in 27 African countries and one of the largest brands on the continent. MTN Uganda had 2020 revenue of  UGX 1.88 trillion (about $531 million) and a pre-tax profit of 460 billion ($130 million). It has 15.7 million phone subscribers, with 5.3 million active data users and 9.4 million mobile money users.
  • Uganda Market: In the densely-populated country of 44 million people, MTN sees much more growth from the young population, as the current mobile penetration of 67% is considered low for Africa. Also, wIth Africell having exited in October 2021 and  Smart Telecom about to follow suit, MTN’s market share could reach 60%.  
  • Offer: 4.47 billion ordinary shares, accounting for 20% of the company are on sale at UGX 200.00 ($0.057) per share. The minimum lot is 500 shares, so the investment required is UGX 100,000  ($28) per shareholder. 
  • Allocation: All East African community shareholders are being offered 5 incentive shares for every 100 they buy, but MTN customers who apply on the IPO platform and pay with MTN mobile money get another 5, for a total of 10 incentive shares. Ten (10) incentive shares for every 100 bought are also being offered to Uganda professional and East Africa professional investors who purchase shares worth over UGX 177 billion ($50 million). If oversubscribed, Uganda retail investors and MTN employees will be given priority and allocated up to UGX 5 million ($1,414), with others on a pro-rata basis, in the order of Uganda professional investors, then East African investors, and finally international other investors. MTN has received approval to market the shares to investors in Tanzania and Kenya, and they await clearance from other EAC countries. The offer may be suspended if it does not reach 25% uptake (about 1.12 billion shares)
  • USE: The MTN shares will be listed on the Uganda Securities Exchange. Currently, its largest counter is Stanbic Bank Uganda, that had its IPO in 2006, and accounts for about half the market activity, but MTN are expected to overtake them after listing their 22.39 billion shares in December.
  • IPO Applications: The process is fully electronic and starts by applying online to open a securities central depository (SCD) account. This can also be via USSD on an MTN line, or via the MTN app or at an authorized selling agent. In  Kenya,  investors can apply through a stockbroker like Dyer & Blair who will verify their ID and PIN details. The minimum to buy is Kshs 3,250 at Dyer & Blair, which is for 500 shares at Kshs 6.50 per share.
  • Shareholding changes: Ahead of the IPO, currently MTN Group owns 21.5 billion shares (96%) and the MTN Chairman, Charles Mbire, a Ugandan businessman who also chairs the USE, owns the other 4%. After the IPO, MTN will have 76% and new investors will have 20%, and MTN, Chairman Mbire, and the directors have committed not to sell any more shares for the next year. MTN Group will still exercise controller the composition of the board, and acquisition, financing, and branding decisions.
  • Taxes: MTN Uganda is the largest taxpayer in the country and they paid a disputed amount of transitional license fee totaliing UGX 50 billion ($14.1 million) ahead of the IPO.
  • Use of Funds and Debts The funds raised will go to reimburse MTN who have grown the business since inception by investing over one trillion shillings and who have also committed to investing another trillion over the next three years expanding the network, mainly in rural Uganda for other growth activities. MTN Uganda’s debt is UGX 194 billion (equivalent to about $55 million) and $45 million at June 2021. MTN Group has arranged a syndicated loan, through Stanbic South Africa, with local banks in Uganda – Stanbic, Absa Citi and Standard Chartered.
  • Fintech opportunities: The country was reported to have 31.3 mobile money accounts but after a cleanup exercise, the number of active subscribers was determined to be 20.3 million. MTN’s mobile money has 45,000 merchants customers signed on, it sees a great opportunity to grow that market that it predicts can be ten times larger. They will also roll out bank tech products – savings, loans and insurance – and compete with banks at the bottom of the pyramid.
  • Dividend: Payout was 57% of profits in 2018 and 2019.  
  • Threats: Price competition may affect average revenue per user and profit margins, and a weakness identified is the low income of consumers.
  • Timelines: The IPO runs for just over one month. It opened on October 11 and closes on November 22, with an announcement of the results on December 3 and listing on December 6. Refunds, if any, will be paid from December 3. 
  • Transaction advisors: SBG Securities Uganda is the transaction advisor and lead sponsoring broker. Receiving banks are Stanbic, Standard Chartered and Absa in Uganda. Selling agents are SBG Uganda, Dyer & Blair Uganda, Crested Capital and UAP Old Mutual. In Kenya, these are SBG Securities and Dyer and Blair.
  • Offer Costs: Budget is UGX 32.6 billion with MTN International expected to foot 22.3 billion and MTN Uganda the other 10.3 billion. The bulk of the payments are the placement fees (UGX 9.9 billion) and the transaction advisor (7.5 billion). Others are VAT on professional fees (3.6 billion), while the tax advisors in SA and Uganda will earn a total of 4.2 billion. There is also the reimbursement of selling agents of retail shares (4.2 billion) and the public relations bill to MTN Uganda is UGX 356 million.
  • Valuation:  With the shares offered at UGX 200, Dyer & Blair advise a “buy” with a target market price of UGX 218, a 9% upside from the current offer. And when incentive shares are factored in, this makes the value of the shares almost 15% higher than the IPO offer.
  • Verdict: The euphoria could be similar to the Safaricom IPO in Kenya, whose investors are also yearning for another large IPO.

Read more at the MTN Uganda IPO official website.

EDIT December 3, 2021: Offical MTN Uganda IPO results show a 64.8% subscription as 2.90 billion of the 4.4 billion shares were taken up by 21,394 investors. This includes sale shares and incentive shares.

The IPO grossed UGX 536 billion (approx $150 million) and all applicants will receive their full allocation, with the shares listed on the Uganda Securities Exchange from 6th December.

Shareholding announced with IPO results: MTN International (Mauritius) 18.594 billion shares (83.05%), National Social Security Fund (NSSF) Uganda 1.98 billion shares (8.84%), Charles Mbire 892.23 million shares (3.99%), NSSF – Sanlam (0.26%), Bank of Uganda defined benefits Scheme – Sanlam (0.19%), National Social Security Fund (Kenya) – Sanlam (0.18%), Duet Africa Opportunities Master Fund IC (0.13%), EFG Hermes Oman (0.12%), First Rand Bank (0.10%), and the Uganda Revenue Authority staff benefits scheme – Sanlam (0.08%). Other shareholders have 684.47 million shares (3.06%), for a total of 22.389 billion shares.

More here.

New unquoted board for company listings at Nairobi

The Nairobi Securities Exchange (NSE) has launched a new push to increase the number of listed companies. Rather than wait for companies to get ready for listing, they had set out to seek and groom companies under the Ibuka program and have now launched an unquoted securities platform (USP) to woo more companies.  

At an event organized by the Bob Collymore Foundation to connect small and medium businesses seeking capital with potential investors, NSE CEO Geoffrey Odundo said there are 498 private equity funds in Africa with 238 are active in Kenya where there was Kshs 2 trillion available to invest in well-run businesses. He said the new NSE programs are designed at improving the transparency, governance, and chances of business survival after a founder hands off, not just raising capital.  

The USP is an information and infrastructure solution to promote the issuing and trading securities by unquoted companies who can list corporate bonds, ordinary or preference shares, REIT’s, private offers, rights issues and secondary listings of any amount. It targets the many companies whose shares trade over-the-counter (OTC), but whose owners are seeking liquidity, clearer valuations and maybe later to raise capital.

Companies can apply by sending a prospectus to the CMA and NSE, one year of audited accounts, board resolution, incorporation documents and a fee of Kshs 5,000. It takes 21 days for a decision to be made if all documents are sent and the cost of listing is 0.03% of the value of the securities.

The NSE’s USP board has two listings, both from Acorn Holdings. As part of the conclusion of its green bond program, Acorn has transferred the student accommodations it is building into an Acorn D-REIT (real estate development trust), and once they are complete, they will be sold to an Acorn I-REIT (income real estate investment trust) that will manage the properties. A few weeks ago, on July 9, the USP board had its first trades as one million shares of Acorn worth Kshs 20 million (Kshs 6M of the D-REIT, and Kshs 14M of the I-REIT) were traded.

Homeboyz Entertainment at the NSE

A peek at the prospectus of Homeboyz Entertainment that was released after their listing at the NSE

Monday, December 21 saw a brave move by Homeboyz Entertainment to list on the Nairobi Securities Exchange (NSE) by introduction. The Homeboyz board approved the listing on the growth enterprise markets segment (GEMS) of the NSE back in February 2020, just before Covid hit the entertainment industry and the company now projects a 68% decline in their business this year due to Covid.

With the listing of 63.2 million shares at Kshs 4.66 per share, the twenty-five-year-old company becomes the first pure entertainment company on the NSE. Homeboyz was one of the companies in the NSE’s Ibuka program which it joined in May 2019 and has now graduated from. The event comes a few days after the NSE and CMA approved the listing.

  • Ownership and management: Homeboyz share capital is Kshs 31.6 million divided into 63.2 million shares. Owners are Myke Rabar, the co-founder and CEO with 35.6 million shares (56.4%), Rose Maina, the finance and administration director, with 27.5 million shares (43.6%), and John Rabar 20,000 (0.03%). A debt owed to the directors of Kshs 11.6 million was converted to equity in a share split ahead of the listing in November 2020. The three are directors along with Humphrey Wattanga (Chairman), Joe Otin and Stephen Gugu and the firm has 55 employees.
  • Turnover in 2019 was Kshs 311 million and in 2018 it was Kshs 346 million.  Interestingly, a majority of their revenue comes from their soundtracks business (earn Kshs 120 – 130 million every year from Soundtraxx), while events management and equipment leasing have fluctuated as they are more competitive. The company had a pre-tax profit of Kshs 38.9 million in 2019 and in 2018 was a loss of 9.7 million.
  • Have recent contracts with the Kenya Revenue Authority, State House, Kenya Open Golf  Kenya Rugby League, Football Kenya Federation, Sports Loto, and E-Sport Kenya Federation. In the past, they have partnered with UK’s Tiger Aspect Production on Tinga Tinga Tales TV series and now have another deal with Warner Bros for a video game called Pamoja Mtaani. 
  • Their brands include Swype (a payment gateway), Homeboyz Aktivate (experiential marketing), Music Technology Academy (a school for DJs), Y-HUB (online learning) and Fixxit. They also partnered with Publicis Africa Group in 2016, one of the world’s largest communications agencies.
  • Directors have a similar shareholding in Homeboyz Holdings Ltd while at Homeboyz Radio 2017 Ltd, Radio Africa owns 51% of the radio business.
  • They bought a bottled water company for Kshs 100 million in 2009 and divested from it in 2011.
  • Bank at Habib Zurich, NCBA and Bank of Africa. Their main financing is now with Bank of Africa who Homeboyz have asset finance and overdraft facilities that are enjoying a Covid moratorium up to March 2021.
  • Listing fees are Kshs 9.1 million and include payments to the nominated advisor of Kshs 2.1 million (AIB-AXYS), transaction advisor 2.1M (Horizon Africa Capital), and legal advisor 2.8M (MMC Asafo). The auditor is Matengo & Associates.

Mdundo lists on Nasdaq

September 4 saw the listing of shares of Mdundo on Nasdaq’s First North Growth Market in Copenhagen, Denmark. 

This comes after the Danish firm, Mdundo offered 4 million new shares at 40 million Danish Kroner in August. They were marketed in Denmark but got interest from Sweden and other countries, resulting in 2,900 investors taking up 8.4 million shares, and giving Mdundo a value of 102 million Kroner (~$16 million).

Excerpts from Mdundo’s investor prospectus.

  • Ticker name: “MDUNDO
  • Mdundo enables musicians to upload songs and make money from their content as people to stream and download music from their app and website. It has a commercial focus in Kenya and Tanzania. 
  • Mdundo means rhythm in Swahili and it has 5 million monthly active users, half of who are in East Africa, who stream music free, to listen, and pay to download songs. 
  • Mdundo has paid out 1.9 million Kroner (~$300,000) to artistes who have uploaded 230,000 songs from 32 African countries.
  • Tanzania’s Diamond Platnumz is one of Mdundo’s top artists with over 7.2 million downloads, while Kenya’s Willy Paul, Naiboi and Khaligraph Jones have all received the Mdundo Platinum Award which is given to musicians with 1 million downloads. 
  • Use of Funds: With the new investments, Mdundo aims to double in size to 9 million subscribers in 2021 and 18 million in 2022, targeting sub-Saharan Africa, the world’s fastest-growing mobile market which will be 623 million large by 2025. The app can also be used out of Africa and the company plans to grow its international users with a subscription model that goes for about $2 per month. 
  • In the deal, they are acquiring 100% of Mdundo Kenya for 1.2 million Kroner (~Kshs 21 million). As at June 2019, it had revenue of Kshs 6.8 million and a loss of Kshs 21 million for the year. This was after costs of sales of Kshs 4 million (they pay musicians over half their revenue), salaries of 12 million, and 4 million each for administration and distribution expenses. Mdundo Kenya had accumulated losses of Kshs 75 million.
  • Upside: They estimate their valuation at $2 per active user while their peers are trading at $10 to $115 per user. 
  • Mdundo had 40 angel investors, and the new shares were sold through Danske Bank, Nordnet, Jyske, Nordea Nykredit and Arbejdernes Landsbank, with Danske Bank as the settlement agent. 
  • Other “African exports” to foreign exchanges include Jumia at the NYSE, Naspers at Amsterdam and Airtel Africa and Vivo Energy in London. Hope Mdundo performs better than Jumia.