The Botswana Stock Exchange (BSE) has narrowed its losses this year after the domestic company index (DCI) contracted slightly compared to the previous years, thanks in part to strong performance from some listed companies that outperformed other benchmark rates in returns.
According to available figures, the DCI will end the year 4.4 percent in the red, an impressive recovery from 11.4 percent losses in returns recorded last year, signalling that the local stock market rout that began in 2016 might becoming to an end. The DCI is used to measure share price performance of the 23 listed companies on the domestic counter.
Since 2016, the DCI has been on a downward trend, falling by 11.3 percent in 2016, before recovering slightly in 2017 with a 5.8 percent loss but dropped the ball in 2017 as the DCI badly performed after plunging 11.4 percent. However, the narrowed losses to 4.4 percent this year will boost confidence among investors after the Thapelo Tsheole led stock exchange proved that even in the face of economic adversities, listed companies can return best value to investors.
The DCI’s performance this year was dragged by dismal share price performance from Letshego, Standard Charted Bank Botswana and SeedCo. The country’s biggest and profitable microlender Letshego’s share price plunged by 56.8 percent this year, making it the biggest loser. Dumisani Ndebele, the company’s acting chief executive officer, explained that part of the fall in share price can be traced to the illiquid stock market – which happens when it becomes difficult to difficult to sell of the stock without substantial loss in value.
Ndebele said share trades have gone low on retail volumes, and in the past when this happened, the market relied on institutional investors to pick up these trades, and this had a positive impact of keeping stock values afloat and steady.
The second biggest loser is Standard Chartered Bank Botswana, losing 56 percent of share value at a time that the oldest commercial bank in the country was returning to profitability. The bank’s pre-tax profit for the six months ended June 2019 was up 20 percent to P33 million. Stanchart’s return to profitability started last year when it raked in P20 million in pre-tax profit, coming from a period of losses which knocked the bank out of the top three commercial banks in Botswana by profit.
The commercial bank which has been operating in the country for 122 years has had a tough time in the last three years. In 2017 the bank recorded a startling loss of about P66.5 million in the half year results, triggering in motion a larger loss in the 2017 full year results which came at a whooping loss of P232 million. This was in contrast to the P79.7 million profit made in 2016, which of course was also a sign of the bank’s declining bottom line performance – falling from the highs of P319.2 million made in 2014, before plunging to P47.4 million in 2015.
SeedCo, which became the only listed agriculture focused company on the BSE in October 2018, dropped 45.5 percent in share value amid the worst drought in Southern Africa. In the same period, the seed company’s in losses increased from P15 million for the half year ended September 2018 to more than P25 million in the September 2019 interim results.
The losses from the three companies were mitigated by strong performance from Letlole, First National Bank Botswana (FNBB), Cresta and Sechaba, which brought in returns that not only outperformed the DCI, but most certainly beat any returns from any other benchmark rates in the country.
The property listed outfit Letlole La Rona was the top performer, returning about 27.8 percent to investors through its share price appreciation. Letlole had been making strategic moves regarding its property portfolio, snapping up a retail mall in Mahalapye which is now contributing positively to the company’s revenues. Moreover, Letlole exited the hospitality sector after disposing some of the properties that were rented to Cresta, leaving the latter with the buildings in a transaction valued over P250 million.
Botswana’s biggest commercial bank, FNBB was winning both ways this year. The bank which boasts of the largest clientele and a huge balance sheet remains one of the most profitable company on the BSE, delivering a pre-tax profit of P945 million for the year ended June 2019. The performance has been recognised by investors who sent the bank’s stock soaring to 16.3 percent, making it the second-best performing stock on the local stock exchange.
The hospitality and leisure giant Cresta made the list of top performing companies on the BSE again, this time ending the year with its share price up by 10.83 percent, thanks in part to rising profits. The company has cut down its expenditure on rentals after acquiring properties which housed their hotels from Letlole La Rona.
Another solid returns on the BSE came through Sechaba Holdings whose share price is up by 10 percent. Sechaba’s profit for the year ending December 2018 raked in P220 million, up 97.1 percent from the previous corresponding period following an increase in consumption of products, in particular alcohol.
The brewer’s impressive financial performance was stoked by President Mokgweetsi Masisi’s decision to extend the operating hours of liquor outlets, allowing the company to increase sales volume. The company as it now seems, also benefited from a huge cut in the alcohol levy, after the government slashed the levy which was introduced in 2008 – from 55 percent to 35 percent for local and imported alcoholic products.