Dar es Salaam's investors shun KQ shares

The biggest rights issue in the East African Community closed last Friday recently with Tanzanian investors showing a cold shoulder to the 400bn/-($250 million) offer.

Tanzania's sponsoring broker, Orbit Securities Chief Executive Officer Laurean Malauri could not state the amount purchased but said the response was low despite a number of sensitizing fora since last December.

Market data from Dar es Salaam Stock Exchange (DSE) shows that KQ shares are seldom trading since cross-listed at the Dar bourse in 2004. The share closed last week trading at 1, 020/- ($0.65) a piece.

Due to the rights issue magnitude, the KQ management appointed three lead sponsoring brokers in Uganda, Tanzania and Kenya to boost chances of hitting the share sale target.

However, the KQ's Treasury Manager Ms. Jane Kiboi said the offer was expected to be successful as "anything above 70 per cent of the rights issue is deemed a success".

The government of Kenya and KLM/Air France the majority shareholders have confirmed to fully take up their combined 49 per cent as well as other institutional shareholders to come to 70 per cent of the rights issue.

The manager said rights issue fund will enable the airline to realize its 10-year dream of having 107 aircraft comprising 44 wide bodies and 63 narrow bodies.

The aircraft will enable KQ to fly to 115 destinations in six continents. Current KQ is serving 55 destinations on four continents, with 31 airplanes.

Kenya's Standard Investment Bank Director Corporate Finance, Mr. Amish Gupta said the rights issue being the biggest in the region signifies the bloc's ability to handle big IPOs.

"Kenya Airways grew on debt successfully since privatization on 1996," Gupta said in Dar es Salaam last week, adding this is the first time Kenya Airways has come to the capital market since its IPO in 1996, which he said was equally oversubscribed.

Uganda's NTV also reported that there was no trading of KQ shares in Kampala despite the offer.KQ is listed on the Nairobi Securities Exchange (NSE), Uganda Securities Exchange (USE) and Dar es Salaam Stock Exchange (DSE). 

The rights issue offer is 280/- ($0.18) per share with current shareholders given the rights of 16 shares for every five.

Source, The East African Business Week, http://www.busiweek.com,reported by Leonard Mwanga

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