Nairobi Securities Exchange PLC · NSEKE:NSE
Nairobi Securities Exchange — CMA Forum – Creating an Enabling Environment for Public Flotation and Listing of Private C (July 2005)
39 slides from Nairobi Securities Exchange's conference presentation, Jul 28, 2005
Slide 1: Listing Requirements – MIMS, AIMS and FISMS
Listing Requirements – MIMS, AIMS and FISMS A PRESENTATION AT THE CMA FORUM – CREATING AN ENABLING ENVIRONMENT FOR PUBLIC FLOTATION AND LISTING OF PRIVATE COMPANIES By: Mr. Chris Mwebesa Chief Executive 28th July 2005 at the Grand Regency Hotel NAIROBI STOCK EXCHANGE
Slide 2: Table of Contents
TABLE OF CONTENTS Sourcing Capital through the Exchange Eligibility Criteria for Listing Absorptive Capacity of the Capital Markets Policy Tax Incentives Financial Benefits of New Prospects for Listing
Slide 3: Sourcing Capital through the Exchange
Sourcing Capital through the Exchange NAIROBI STOCK EXCHANGE
Slide 4: Equity Financing
Equity Financing Raising funds through an equity listing: Securities may be brought to listing by way of: Initial public offering (IPO): where the public at large is invited to subscribe. Private placement: shares are placed for sale to already identified investors. Introduction: to provide a mar
Slide 5: Debt Financing
Debt Financing Raising funds through an equity listing: Securities may be brought to listing by way of: Public offer (PO): where the public at large is invited to subscribe. Private placement: The bond is placed for sale with already identified investors.
Slide 6: Advantages to Sector Players
Advantages to Sector Players Use the funds for the following purposes:- Financing Business Expansion and Growth: acquisition of equipment and technology or new real estate; renovations and upgrading of existing revenue generating assets and facilities;
Slide 7: Eligibility Criteria for Listing
Eligibility Criteria for Listing NAIROBI STOCK EXCHANGE
Slide 8: The Market Segments
The Market Segments The Main Board The Main Investment Market Segment (MIMS); The Alternative Investment Market Segment (AIMS); The Fixed Income Securities Market Segment (FISMS);
Slide 9: General Eligibility Requirements for Public Offering of Shares and Listing
General Eligibility Requirements for Public Offering of Shares and Listing Incorporation: The company must be incorporated or registered under the Companies Act. Financial records: shall have published audited financial statements complying with IAS for an accounting period ending on a date not
Slide 10: Requirements: Competence and Suitability of Directors
Requirements for Public Offering of Shares and Listing Competence and suitability of directors and management: The issuer must not be in breach of any of its loan covenants – the maximum debt capacity. As at the date of application and for a period of 2 years prior, no director shall have:- – An
Slide 11: General Eligibility Requirements: Management and Board
General Eligibility Requirements for Public Offering of Shares and Listing Competence and suitability of directors and management: Suitable senior management with relevant experience having been employed for at least 1 year prior to listing; No change of management for a period of 12 months fo
Slide 12: General Eligibility Requirements: Transferability, Voting Shares, Approval
General Eligibility Requirements for Public Offering of Shares and Listing Transferability of Securities: Securities must be freely transferable and not subject to any restriction on marketability or pre-emption rights; Undertaking: The Company must undertake to comply with the rules of the mark
Slide 13: General Eligibility Requirements: Solvency and Certificate of Comfort
General Eligibility Requirements for Public Offering of Shares and Listing Solvency and adequacy of working capital: Should not be insolvent; Certificate of Comfort: If the issuer is listed in a securities exchange outside Kenya or is licensed to operate as a bank or an insurance company the iss
Slide 14: Eligibility Requirements: Share Capital and Net Assets
Eligibility Requirements for Public Offering of Shares and Listing Part A Part B Requirement Criteria for MIMS Criteria for AIMS Size: Share Min. authorized Min. authorized Capital issued and fully issued and fully paid up share paid up share capital of Ksh. capital of Ksh. 50.0 million. 20.0 millio
Slide 15: Eligibility Requirements: Track Record and Profitability
Eligibility Requirements for Public Offering of Shares and Listing Part A Part B Requiremen Criteria for MIMS Criteria for t AIMS Track +ve profits after Must have Record, tax attributable engaged in the profitability to shareholders same business and future in at least 3 of for a min. of 2 prospect
Slide 16: Eligibility Requirements: Share Ownership Structure
Eligibility Requirements for Public Offering of Shares and Listing Part A Part B Requirement Criteria for MIMS Criteria for AIMS Share Following the IPO Following the IPO at ownership at least 25% of least 20% of the Structure the shares must shares must be held be held by not by not less than 100
Slide 17: Eligibility Requirements for FIS Listing on the FISMS
Eligibility Requirements for Public Offering of FIS and Listing on the FISMS Requirement Incorporation A public company registered under the with limited Companies Act (Cap 486) or any other liability body corporate established or incorporated in Kenya under the provision of any written law. Issue
Slide 18: FISMS Requirements: Availability of Financial Records
Eligibility Requirements for Public Offering of FIS and Listing on the FISMS Requirement Availability The issuer other than GoK issuing T- and reliability Bonds or other Government securities, of financial must have published audited financial records statements complying with IAS for an accounting
Slide 19: FISMS Requirements: Management and Certificate of Comfort
Eligibility Requirements for Public Offering of FIS and Listing on FISMS Requirement Competency The same requirements as pertains to and MIMS and AIMS. suitability of managemen t Certificate of If the issuer is a bank or insurance Comfort company, the issuer must obtain a certificate of no objectio
Slide 20: FISMS Requirements: Track Record, Guarantee, Debt Ratios
Eligibility Requirements for Public Offering of FIS and Listing on FISMS Requirement Track Record, +ve profits after tax attributable to profitability shareholders in at least 2 of the last 5 and future financial periods prior to listing. prospects Guarantee When the issuer does not satisfy the Re
Slide 21: FISMS Requirements: Size of Issue and Renewal
Eligibility Requirements for Public Offering of FIS and Listing on FISMS Requirement Size of the The minimum size of issue shall be Ksh. Issue 50 million. The minimum lot size shall be: Ksh. 100,000 for corporate bonds and preference shares or higher amount as maybe required by the Authority; and
Slide 22: Initial Listing Fees
Initial Listing Fees MIMS AIMS FISMS 0.06% of the 0.06% of the 0.0125% of the value value of the value of FIS to be listed as securities to of the follows:- be listed securities to i) Corporate bonds subject to be listed and other FIS - a min. a min. of Ksh. subject to a of Ksh. 100,000 and a 200,00
Slide 23: Absorptive Capacity of the Capital Markets
Absorptive Capacity of the Capital Markets NAIROBI STOCK EXCHANGE
Slide 24: Absorption Capacity of the Capital Markets (2004)
Absorption Capacity of the Capital Markets (2004) INSTITUTION AMOUNT (Ksh. bn) Insurance 4.46+ Fund Manager 2.24+ Co-operative Sector 8.60+ Pension Funds 20.00* Households 19.49+ Kenya Diaspora 10.00 Non Bank Financial 2.12+ Instit. TOTAL 66.85 * Includes capital growth, + 2003 estimates
Slide 25: Policy Tax Incentives
Policy Tax Incentives NAIROBI STOCK EXCHANGE
Slide 26: Policy and Tax Incentives
Policy and Tax Incentives As an incentive to encourage more listings at the NSE, the Minister proposed that newly listed companies pay corporation tax at a lower rate of 20%, for a period of 5 years, provided these companies offer at least 40% of their shares to the Kenyan public (2005); New and e
Slide 27: Policy and Tax Incentives
Policy and Tax Incentives Companies that apply and are listed shall get a tax amnesty on their past omitted income, provided they make a full disclosure of their assets and liabilities and undertake to pay all their future due taxes (2001); Expenses incurred by companies in having their financial
Slide 28: Financial Benefits of Capital Markets Financing
Financial Benefits of Capital Markets Financing NAIROBI STOCK EXCHANGE
Slide 29: Optimization of Capital Structure
Financial Benefits of Capital Markets Financing Optimization of Capital Structure Far too many firms are too heavily geared Bank debt increasingly the cause of bankruptcies or other insolvency interventions Greater operating flexibility on management to be more entrepreneurial due to lack of c
Slide 30: Lowering of Cost of Capital
Financial Benefits of Capital Markets Financing Lowering of Cost of Capital Equity Cost of equity capital is the dividend return adjusted for growth. Dividend policy is in the control of the firm Debt Cost of debt capital is interest payments adjusted for tax (tax deductible) Coupon interest
Slide 31: Optimal Capital Structure and Cost of Capital
Financial Benefits of Capital Markets Financing Optimal Capital Structure is defined as the mix of debt and equity which minimises the weighted average cost of capital. Factors affecting cost of capital that the firm CANNOT CONTROL!! 1. Interest rate regime 2. Level of taxes Factors affecting cost o
Slide 32: Capital Markets offer a Competitive Source of Funds
Financial Benefits of Capital Markets Financing Capital Markets offer a Competitive source of Funds for expansion and growth!!!!
Slide 33: Indicative Costs of Equity (Kshs.)
Indicative Costs of Equity (Kshs.) (Friday 22 July 2005) Securi Price Mkt. EPS DPS P/E Divide ty Cap. nd (millions) Yield Unilev 116.0 5,669.5 7.39 8.00 15.70 6.90% er Tea 0 0 Rea 20.25 1,215.0 2.14 0.80 9.46 3.95% Viping 0 o Kenya 64.50 29,774. 8.40 1.25 7.68 1.94% Airwa 20 ys TPS 82.50 3,191.0 3.3
Slide 34: Indicative Costs of Equity (Kshs.)
Indicative Costs of Equity (Kshs.) (Friday 22 July 2005) Securi Price Mkt. EPS DPS P/E Divide ty Cap. nd (millions) Yield Barcla 250.0 50,920. 18.00 14.00 13.89 5.60% ys 0 65 Bank CFC 56.00 8,064.0 3.01 0.84 18.60 1.50% Bank 0 ARM 24.75 2,326.5 1.25 0.40 19.80 1.62% 0 Kenol 109.0 10,986. 8.20 2.00 1
Slide 35: Indicative Cost of Listed Debt
Indicative cost of Listed Debt Name Teno Issue Maturi Interest Amount Raised r Date ty Date (Kshs. millions) (Yrs) EADB 4 11/7/01 26/4/06 TB + 2,000.00 MTN 0.75% (Currently 1,200 has been redeemed) EADB 7 19/7/04 1/7/11 7.5% 800.00 (Second MTN tranche of 700.00 million yet to be raised and listed) S
Slide 36: Other Benefits of Capital Markets Financing
Other Benefits of Capital Markets Financing Provides a market Objective valuation for securities. of securities by market forces. Greater Greater efficiency liquidity/transferab ility of securities, due to more reduces risk of rigorous disclosure holding the asset. requirements. Greater pu
Slide 37: New Prospects for Listing
New Prospects for Listing NAIROBI STOCK EXCHANGE
Slide 38: New Prospects for Listing: MIMS and FISMS
The Main Investment Market Segment (MIMS) Equity Commercial Bank; Uchumi Supermarkets Rights Issue (Ksh. 1.2 billion); 30% of Kenya Electricity Generating Company (KENGEN); The Fixed Income Securities Market Segment (FISMS) Athi River Mining 5 year Floating Rate Kshs. 600.00 million bond;
Slide 39: End
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