By Portia Nkani
The Botswana Stock Exchange Limited (BSEL) listed companies recorded reduced earnings resulting in share price declines in the year 2018 compared to 2017.
The information sourced from BSE’s market status report for the period January ÔÇôDecember 2018 indicates that despite low earnings, these companies to the delight of the investors have maintained attractive dividend payouts.
The 2018 dividend yields sat at 5.5 percent from 5.1 percent in the previous year during the same reporting period.
BSE figures shows that despite trading on hostile economic conditions, Sechaba Brewery Holdings Limited emerged the top performer amongst the top five in the local bourse at P425.6million.
The other four major top performers were; Letshego Holdings Limited at P425.9 million; New African Properties traded P298.4 million while the newly listed CA Sales Holdings Limited entered the club of new top performers at fourth position having traded at P195.3 million during the past year.
First National Bank Botswana (FNBB) beat other commercial banks to the fifth position having traded at P80.9 million in 2018.
From the market status report, in 2018, the Domestic Company Index (DCI) which shows the aggregate changes in market value on the basis of share prices declined by 11.4 percent compared to a decline of 5.8 percent in 2017. In 2018, the report shows, “eight companies compared to 12 in 2017 registered positive price changes, 14 compared to 11 in 2017 registered negative price movements and 4 compared to 1 in 2017 closed the year with share prices back to their 2017 levels.
BSEL led by Thapelo Tsheole noted, “the impact of Choppies Enterprise Limited, arising from its failure to submit audited financials on time, on the decline in the total domestic market capitalization and subsequently the DCI cannot be ignored.”
On 28th September 2018, Choppies lost 76.3 percent of its value when the share price plummeted from P1.69 to P0.40 in a single day. On that day, additionally, “its market capitalization slumped from P2.2 Billion to P521.5 Million.
Due to this, Choppies contributed 41.2 percent to the decline in the DCI. In other words Choppies contributed negative 4.7 percentage points to the negative 11.4 percent decline in the DCI in 2018.”
Further to the report, turnover levels dropped by 25 percent in 2018 relative to 2017. The Exchange attributes this experience mainly to 3 events that occurred in the year and also in the prior year.
These are the introduction of the minimum brokerage commission of 60 basis points (0.60%) in April 2016, the reallocation of investment mandates in 2018 by some of the largest pension funds in the country following termination of investment management contracts at 2 of the largest local asset managers and lastly the decline in share prices.
Given the dominance of institutional investors (both local and international) in the Botswana market, the increase in transaction costs was definitely a sensitive issue particularly coinciding with a slowdown in corporate earnings as it effectively eroded their returns.
Perhaps the suspension of Choppies could be an additional factor, given its liquidity in the market. Prior to its suspension from trading, Choppies was the 4th most traded company on the BSE.
Tsheole had last month (January) at the first opening bell for the year, revealed that the Botswana bond market in the region remains one of the diversified after South Africa, hence offering a positive hope to help revamp the country’s economy in 2019.
The man at the helm of the Exchange anticipates that 2019 will be a much better year for the local bourse than the previous one in terms of increase in bond market performance.
Looking at the 2019 investment prospects at the Exchange house, there are a number of investment projects centred on technology such as the Data Display Screens which he said will assist with information sharing as well as keeping the market updated. He said the screens will also have space for advertising, hence generating income for BSE.