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Sunday, July 16, 2006

Uchumi Reopens but will it be re-listed?

Uchumi will have a tough time getting re-listed UNLESS the CMA bends the rules & regulations.

Nevertheless, the CMA can redeem its image by thinking out of the box by allowing Uchumi on the NSE as an AIMS (Alternative Investment Market) listing but WARNING to ALL that there are risks involved & the exceptional circumstances for the re-listing.

For the relisting, either Uchumi will have to either come out of receivership OR the shares will trade even though it remains under receivership. In the latter, the ordinary shareholders will have no say (i.e. voting rights) since the receiver has the "control".

It is not a crime to be STUPID so those who buy into Uchumi should be made aware of the risks.

Uchumi might become another NBK story i.e. just as NBK will take at least another 2 years to pay dividends (unless the government "rescues" it), Uchumi will be in the same spot. It will be a slow but necessary part of Uchumi becoming a firm capable of moving to the Main Board of the NSE.

Good news: Uchumi will not have to pay income taxes on its profits for many years & that means it gets to keep more of the cash! Nakumatt will be forced to pay income taxes considering it is profitable & under greater scrutiny. A strategic investor could shield profits by doing a Reverse takeover.

Ironically, Nakumatt will probably list in 2009 which is in line with the earliest Uchumi will be profitable. I wonder which will cause more excitement in the market?

A better option is to start shopping Uchumi to the highest bidder asap i.e. while in receivership, it is easier to negotiate the sale of a huge chunk to a strategic investor.... that could be Sameer, local outfit like Tesco (which had franchised some stores but not in kituyi's good books), foreign chain...

This would re-energize the brand while providing a "real" lifeline that puts real cash behind the name thus ensuring suppliers will fully be on board. Other "large" suppliers including Mumias, EABL, Unilever, Bidco, etc should be allowed to take up either preference shares or ordinary shares to lend the "cash" support OR convert debt into equity.

Yes, I am recommending a recapitalisation via another RIGHTS issue but restricted to corporates to keep costs low but raise the maximum asap. They could be issued a different class of shares that have preference over current shares thus encouraging the investment.

Uchumi should be allowed to float Commercial Paper esp to pay its suppliers. The suppliers earn interest while Uchumi buys time with increased cash flow. The government should do its part accept Uchumi's CP in lieu of taxes for 2 years!

Without the tough BOLD moves, Uchumi will die a slow death again...

6 comments:

bankelele said...

Nakumatt Fin Diector said in a n interview that the company will list in 2009 (5 years of profits)

Trade Minister says there will be a meeting for Uchumi shareholders this Friday (JUly 21)

gathinga said...

These financing options for uchumi do not look very probable.
Listing on the NSE
With the current leadership at NSE keen to save face in the wake of the collapse, they cannot allow the firm to trade unless it gets completely out of the woods.

Supplies getting tier 2 shares for debt. This has already happened with suppliers swapping 25% of their old debt for preference shares @ 20/= a share. I do not see suppliers digging in any more.

Issuing a bond
I dont see any investors willing to put more money into uchumi unless they are owed already and riks losing everything. this would nopt be wise since failure of such a bond may spell death for uchumi
Selliing out to Tesco or Sameer vs foreign firm
With the stance taken by Kituyi with regards to the behaviour of tesco after the collapse, there is probably not bridges to buil here. Sameer may not be interested after having been jilted once. and besides Merali probalbly knows better than any of us how bad the situation is having had a board slot.

Remaining options
Its becoming increasingly clear that Kituyi is batting towards selling a substantial stake to an international chain with experience in managing large chains in retail. In the short term this will dilute the shareholding but in the long run, it may help the small investors recoup their cash.

Nakumatt: I dont see them listing in 2009 or nay time soon. They have remained a venry secretive empire. Its unlikely that they may want t open up for the scrutiny that comes with listing. eg. where are they getting all this stuff they're selling at half price?? what's the logic? Is it to bury their woos or to clear stocks as they claim?

Kagz said...

1st...Your EMAIL address should be on your blog!

2nd...Hello Mr.Chief Financial Analyst...CFA.. :)

Have you checked out the list of Kenya's Richest on Kenyan Entrepreneur's blog???

Once again the kikuyu-factor can't be ignored :)...and i'm STILL NOT a tribalist :)

More SMART thieves...:)...???

I'd love to hear your comments so pliz do so on the blog or (for confidentiality & non-censoring sake) via my email...sanebrownlady@yahoo.com.

Have a gr8 week!

coldtusker said...

@banks - The CMA should allow firms that are CAPABLE of making profits to list without the 5 year profit history.

Let the investors beware AFTER the risks are spelt out clearly & the numbers are thoroughly audited i.e. no fraudsters!

I would love to have bought into a loss-making Safaricom a few years ago when they were just starting up & spending lotsa cash on equipment & marketing.

coldtusker said...

@Gathinga - The NSE should allow trading. Trading of stocks of firms in "receivership/Chapter 11" is allowed in the USA. The stocks trading & firms' receivership are somewhat mutually exclusive.

BUYERS BEWARE!

Tesco or Merali - Do what is best for Uchumi NOT egos!

Uchumi will take years to get back to sufficient profitability (e.g. NBK). Dilute the stake & sell NOW so that the deep pockets help Uchumi asap.

Half-price, etc is a perception! I price at 200% markup (10/- sold at 30/-) then discount 50% after 1 month (30/2 = 15/-) so I still make 50%. Very common in US & UK.

Also clear dead stock thus re-invest cash in other goods. Uchumi had lots of "dead" stock like Xmas cards for 10 years!

coldtusker said...

@kagz - privacy.

Not a CFA yet but working on it.

I did have comments on KE's list. I think the original list came from Mashada.

It is subjective whereas Forbes & Fortune take a different approach i.e. they use public records to make their estimates.