Financial analysts see BTCL stock on the red

05 Aug 2018

The much talked about stock, the Botswana Telecommunications Corporation Limited (BTCL), is expected to lose further ground in the coming weeks due to increased selling pressure from retail investors.

Local financial analysts believe the trend is to some extent reflecting the negative effects of restricting the ownership of the shares to the citizens only. 

Listed in the Botswana Stock Exchange two years ago, BTCL is trading closer to its 12 month low and has been under pressure for the past two months.

Stockbrokers Botswana Research Analyst, Donald Motsomi says the development is despite the declaration of a final dividend which on its own not factoring in the interim dividend gives a net yield of 7.8 percent on the current share price.

Motsomi says the trend is in contrast to what was observed last year when the share price spiked as investors scrambled for shares looking to cash in on the dividend.

BTCL is largely traded by retail investors who are primarily concerned with meeting their own liquidity needs, “hence we believe selling will continue to outweigh demand. We have gotten enquiries from both foreign retail and institutional investors about whether or not the shares will be opened up to foreigners, indicating interest in the stock. If the restriction was to be lifted we believe we would see significant demand for the stock which could drive it towards its intrinsic value.”

Motswedi Securities Research Analysts Gary Juma and Salome Makgatlhe concurred that, “it is our view that trading restriction on foreign institutional investors and to a lesser extent on local institutional investors is now having an adverse effect on the liquidity and price discovery of BTCL.”  

With this limitation, the Anthony Masunga led telecom company is now dampening the performance of the stock which is against one of the paramount objectives of creating wealth for Batswana who hold the stock either through direct ownership or through the pension funds. Lifting the restriction, the analysts highly believe that at this stage would increase demand for the stock, promote price discovery while at the same time growing the portfolios of Batswana. It will also give BTCL access to a larger investor base should the company consider further equity funding in the future to expand through rights issues. 

BTCL’s Initial Public Offer received offers for 462 million shares at 1 pula each, raising P462 million from the process, which was overly subscribed.

With a market cap of 1,2million, soon after listing the stock went on a peak to trade at P1.35. On Friday the stock was trading at P1, 15.

The company’s financial statements released to the market in late June 2018 show a three percent decline in revenue to P1 567m from P1 615m in the prior reporting period.  The revenue decline was mainly attributable to pressure on mobile revenue, other revenue lines remained relatively flat. The company issued a final dividend of 9.70 thebe per share which was paid on July 20th.

Chaired by Lorato Boakgomo-Ntakhwana, the company is optimistic about its outlook on the back of positive economic forecasts and significant investments in the network, IT enterprise systems, retail shops and working environment.