Despite Pan African micro finance Group – Letshego, exhibiting a bullish financial outlook over the past financial year, its share price remains a stick point which runs counter to the group’s healthy financial outlook.
Presenting the Group’s financial results last week Friday, Letshego Group Managing Director Chris Low admitted that “share’s pricing is significantly undervalued.” Low went on to share the Group’s disenchantment over the diminishing trend of the share price saying, “we are disappointed with the share price this year.” He, however, said the Group will approach stock brokers to work around the possibility of issuing a share buyback – a process he says is quite strict based on Botswana Stock Exchange compliancy procedures.
“If there’s liquidity in the market, we will be putting up a notice to that regard,” he said, adding that buyback is limited to 5 percent. Low expounded to Sunday Standard that the likely cause behind the uninspiring share price movement is that global equity market suggests that markets outside, giving the example of Asia, are proving more attractive in terms of capital appreciation. He says this results in redemption as some funds reduce their shareholding in listed equities. He also cited a challenge that there is a limited option of listed equities combined with a lack of liquidity, which as a consequence reflects a drift in share price. “P2 million turnover stock a week doesn’t give true value,” he said, but however asserted that the Group will continue to exude a bullish outlook, which despite the concern of the share price, will continue to show investors that there is value in the Group’s stock. The current share price, as at Friday, was P2.02 relatively higher than its lowest price in the last 12 months at P1.80. The highest recorded price in the last 12 months is P3.15.
The Group registered a loan growth of 9 percent in Pula terms, which in comparison to previous financial performances shows a lower bottom line growth. The Group’s Chief Financial Officer Colm Patterson cited specifically that Botswana, the Group’s largest contributor, did not grow as expected. He attributed the modest growth to substantial macroeconomic headwinds in some markets. The Group recorded a flat profit growth, which declined by 4 percent in comparison to the corresponding period in 2015.
Based on the financial results, the 11 percent growth of income is significantly lower than the growth in costs which registered at 51 percent. Colm attributed the significant surge in operating costs to three factors, one being that Nigeria was brought into the Group’s results which given the state in which it was acquired forced the Group to focus primarily on polishing its loan collection rather than stimulating loan growth. The second was the once off cost that was incurred in Rwanda relating to tax, which contributed as the main driver to East Africa’s reduction in profitability. He pinned the third reason on staff costs, but added that the Group continues to invest in new skills for new revenue potential growth points. Colm adamantly put it forward that the escalation will normalise as revenues grow. “We want to grow revenues faster than cost and will do that by new revenues and existing revenues,” he said when giving a forward looking outlook of the Group.
In terms of customers, Low observed that customers are currently shopping for the best financing deals. “Customers are just going around looking for the best deal,” he said, adding that retail banks have aggressively entered into the micro financing space.