Uganda Stock Exchange & Uganda Clays Ltd.

There’s been a lot of discussion amongst investment circles for some time now of the BRIC’s, (Brazil, Russia, India, China) emerging markets and frontier markets. As developed stock markets have become increasingly volatile people have been looking for the next new havens to put their money and get good returns. With this point in mind I think the saying goes “The greater the risk, the greater the reward.”

Now while I may take the odd glace in the paper or internet at particular stocks (usually they’ll have some connection to Africa in some shape or form) I’ll easily admit that I’m not one to consult regarding formula’s for figuring P/E earnings, how to benchmark against competitors or true analysis. What I will say is that several times I have found and tracked stocks, and for the most part they have done very, very well ( I see you all nodding your heads that the same exact thing has happened to you and I’m sure that it has.)

I started tracking the Ugandan Stock Exchange around 1-2 years back. Whether I am situated in the country or abroad in the Western world, I read the newspapers daily and it is easy to keep track of what is going on through the business pages (http://www.newvision.co.ug/) or the bourse directly (http://www.use.or.ug/) In fact BusinessWeek recently wrote a very interesting article (http://www.businessweek.com/globalbiz/content/may2008/gb20080530_644799.htm) on the Ugandan Stock Exchange in which an American who invested $10,000 back in 2004, has seen his purse grow to a figure of $70,000 (I read this article after I had invested of course.) I believe he primarily invested in Uganda Clays Ltd and it went through a stock split of 10:1 which left him as a happy man (more on this later.) The BusinessWeek article should definitely be read by those interested and gives an idea of what you may encounter when playing the Ugandan Stock Exchange versus the London Stock Exchange or New York Stock Exchange.

I’m blessed enough to have a small property that I manage in the Central Business District of Kampala that has a tenant who pays me monthly rent. As the money accumulated from month to month in my account I started devising some way to make the money work a little better versus the small amount of interest it gained sitting in the banks coffers (I actually have to pay an administrative fee monthly just for having an account with the bank!) I decided that I would finally test my luck in stocks and would invest in Uganda Clays Ltd.

Now I didn’t do a tremendous amount of investigating into the stock (something I’m not advocating others to do) but I liked to think that I had a good grasp of the environment in the country and it didn’t hurt that UCL was one of the current best performers. East Africa in general and Uganda specifically has a tremendous housing shortage. The construction industry and real estate in general has gone through a boom period tremendously lifting the economy and UCL suppliers roofing tiles and other inputs to the construction industry.
I still remember trying to find the bourse and a broker who could facilitate the transaction for me. I found it a bit difficult as my good friend who accompanied me was having a hard time grasping the concept of what exactly stocks/equities were and what I was looking for. After going into several different banks and liaising with different parties I found myself at African Alliance which is a broker located on the 6th floor of the Workers House +256 414 235577 and completed the transactions quite smoothly. One thing to be aware of is that the USE only actually operates two hours a day, three days a week. I kept on thinking to myself “Why haven’t my stocks been purchased yet?” The reason was due to the fact that it was not a trading day.

All in total I purchased 150 stocks of UCL, hardly enough to break the bank. Thinking back I purchased the stocks at 6,450 Uganda Shillings per share which is the equivalent of roughly $3.90 per share. A few months later after financial results had been posted, to my amazement the stock stood above 10,000 shillings almost $6.06 per share and not a bad days work.

I received a notification of an extraordinary shareholders meeting in the mail the other day in England regarding a stock split and expansion efforts. As of today I can announce it was decided upon a stock split of 100:1, meaning my 150 shares will grow to 15,000 by the time it is all said and done with. Of course the price per share will fall to a little over 100 shillings per share but at least the stock is now accessible to the masses, UCL will be able to raise additional capital for the markets of Sudan and Rwanda and hopefully (fingers crossed) the share price will rise again.