Why, I asked. “There are many reasons, but for today I take issue with your silence on New Vision Printing and Publishing Company (NVL) shares.”
He shared with me a recent report by MBEA Uganda Limited, one of Uganda’s brokerage companies, titled ‘Recommendations – Valid for July 2008’.

The report gives professional views about four of the companies listed on the Uganda Securities Exchange (USE), namely: Bank of Baroda (BOBU), DFCU Limited, Uganda Clays Limited (UCL) and NVL.

The report states that NVL is opening up a local radio station and Television broadcasting is expected in 2009. The CAPEX for these investments will be largely sourced from the proposed rights issue. CAPEX, capital expenditures, are funds used to acquire physical assets or intellectual property.

In other words, they are expenditures for creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year.

According to MBEA, NVL has seen increased revenue grow from advertising and commercial printing whose quality has greatly increased and the majority shareholding of the Government is expected to reduce to 53% from 80%. This will result in extra liquidity on the market. But it is the conclusive remark that has long since been a point of concern for most investors, especially institutional investors.

“While the company is expected to grow in revenues, we are concerned about the revenues radio and television will contribute to the bottom line and how long it
Will take before breaking even,” the report states.

Even without MBEA’s report, the NVL stock has experienced negative sentiments for some time now. In March official figures indicated that NVL’s net current assets were Shs20 billion; and, its market capitalization (based on stock exchange) was Sh90 billion. Market capitalization is the value of the number of shares multiplied by the share price.

At the time its price to earning ratio (P/E) was 32. The P/E ratio is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. If the PE ratio is above 25, it is considered speculative.

This scenario has made it hard to comment on NVL stocks because speculative stocks are usually for companies who have the capacity to increase their share price. For analysts, this might create uncertainty in the market.

So which shares should I consider, you might ask. For this month, eyes are mainly on BOBU, UCL and DFCU. BOBU seems to be the most impressive with MBEA strongly recommending it; and, predicts a significant price appreciation. “An investment on the USE will be incomplete without having BOBU in ones portfolio as its shares are very scarce.

The company has also announced a 10:1 stock split to try and improve liquidity on the market.” This week, BOBU’s share price hovered around Shs 4,300 and its P/E of 16 is the lowest in the market was and the bank has paid commendable dividends each year from listing over the last four years. UCL and DFCU market sentiments are promising.