Wednesday, June 3, 2020

Here is why BTCL stock took the most brutal beating in 2018

BY PORTIA NKANI

In short, BTCL stock price at Botswana Stock Exchange Limited (BSEL) during 2018 pummeled on two fronts: poor operating environment and fearful investors.

In 2018, BTCL ÔÇô which is the only listed teleco, had its performance becoming the subject of speculation amongst the market players including ordinary shareholders. The company’s stock price has been on the rollercoaster plummeting to 0.84thebe earlier this year and staying below its IPO price of P1.00 by Friday (P0.99) this past week.

As if that is not enough, the company is likely to cross-over into 2019 on a low note following its latest cautionary statement in which it says it is anticipating lower financial results.

A peep into its financial books for 2017, during the same period ÔÇô figures shows that it closed the year at a high of P1.84 compared to P1.00 that the stock is at now.

Shareholders continue to wait with anticipation to see what is in store for them in dividends as they will be on their festive mood.

At one point during the year, Garry Juma – a stock analyst at Motswedi Securities broking firm cautioned that the BTCL stock performance going forward will remain volatile due to retail investors who hold bulk of the shares. Retail investors tend not to generally follow any fundamentals.

“The upcoming interims will be key in the share price performance and once again all eyes will be on the dividend,” Juma said.

Other than Juma, local stock analysts have long warned that the trading restriction that was imposed on the BTCL stock will have an adverse effect on the liquidity and price discovery of the company.

Thatayaone Motsomi of Stockbrokers Botswana asserts that BTCL is largely traded by retail investors who are primarily concerned with meeting their own liquidity needs hence the believe that 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,” he said.

BTCL which recently reinvented its business model has also been dealing with the staff morale as some feared losing their job during the transition process during the year.

The company has navigated a challenging operating environment over their reporting periods characterized by reduced customer spending, increased competition on the back of the regulator’s market liberalization measures, a contracting subscriber base across the mobile market, intense competition in this mobile market as operators fought over a smaller pie, and a flat fixed voice subscriber base.

In its full year results in March 2018, BTC’s revenues declined 3 percent to P1.57 billion from P1.62 billion in 2017.

Not only had the 2017/18 revenue declined but also the Profit before tax was 3.9 percent lower to P263.9 million from P274.5 million in the 2017 reporting period, leading to an 8.4 percent reduction in net profit to P217.4 million from P237.3 million previously.

The telecom giant is making significant investments in fixed broadband and mobile broadband infrastructure to capitalize on the increased demand and consumption of broadband internet services, and is currently carrying out a growth and transformation focused strategy to remain competitive.

They are afraid this 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.  The researchers come from a point that should there be a lifting of this restriction- this development will not only increase demand for the stock but also promote price discovery while at the same time growing the portfolios of Batswana. It would also give BTCL access to a larger investor base should the company consider further equity funding in the future to expand through rights issues.

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