Countdown to Uchumi shares listing

May 25, 2011
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, NAIROBI, Kenya, May 25 – With only five days to go before Uchumi Supermarkets shares resume trading on the Nairobi Stock Exchange (NSE), the management is assuring of a strategy that will sustain an impressive growth.

Chief Executive Officer Jonathan Ciano told investors on Wednesday that the chain was banking on product and customer growth, sales revenues as well as the contribution of new branches to help it deliver impressive margins for shareholders.

"The new locations have such a huge impact. If you look at Uganda for example it is a sleeping giant. We have had one hyper (store) that brings in profit in the region of Sh30 to Sh40 million a year. I\’m going to have another hyper (in Gulu Northern Uganda) in a month\’s time and that\’s the growth we are talking about," Mr Ciano said.

With a network of 15 branches, Uchumi is scheduled to open more outlets in Kenya, Uganda and even its first shop in Dar-es-Salam, Tanzania.

Over the next four years, the supermarket projects to report profit margins above 20 percent. The 2011/2012 bottom-line for instance is forecasted at Sh2.5 5 billion up from the estimated Sh1.3 billion that is believed to have been registered for the period 2010/2011.

By 2013/2014 and 2014/2015, the pre-tax profit is projected to have jumped to Sh4.4 billion and Sh5.6 billion respectively.

"We have three more branches that we can talk about right now because we are not sure about their completion time but if you were to include (their contribution), then you have around Sh7billion within the next two to three years coming into our revenue stream," Mr Ciano beamed.

After a long five year-wait, the CEO said it would be unfortunate for the 19,000 shareholders, most of whom are retailers, to dump their shares once they start trading on May 31.

Currently estimated to be worth Sh17.20 per share, many stock market analysts believe that it has a lot of potential to gain significant ground given the great turnaround and the strong fundamentals of the firm that a few years ago had collapsed under a heap of debt.

The Kenya Association of Stockbrokers and Investment Banks Chairman Michael Gichohi told Capital Business that if all the attained growth and its prospects are factored, then the share should not trade below Sh25.

He foresaw it stabilising at Sh28 in the next three to six months and affirmed Mr Ciano\’s advice that shareholders should not dispose them.

Further, Mr Gichohi who\’s also Suntra Investment’s Managing Director said the lifting of the Uchumi share suspension will stimulate the equities market, whose activity has been quiet.

"This is a major turnaround because investors are going to see that you can get a company out of receivership back into profitability and then back to the stock exchange. That will bring people to start looking for opportunities to more into such a company," Mr Gichohi said.

The company, whose worth is estimated at Sh4 billion is a classic case of how a company can be transformed from a loss-making venture to a billion-shilling enterprise, is likely to attract the attention of institutional and high profile investors.

For the small investors are likely to take a shorter term perspective, the analyst advised that they should consult with the intermediaries so that they are able to benefit from information that can help them maximise their investments. 

In the meantime, the chain intends to continue focusing on customer service, maximisation of sales revenues and also operating efficiently

On how soon the chain is expected to start paying dividends, the CEO disclosed that the board would have meet and deliberate on the best policy to adopt.

As the only listed supermarket chain in the country, Uchumi now hopes that it can concentrate on improving its business and also achieve its objective of having its shares cross listed in all the East African bourses.

Follow us TWITTER @CapitalFM_Kenya and the author at https://twitter.com/Cirunjoroge
 

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