A local brokerage Stockbrokers Botswana has painted a positive outlook for Letshego Holdings Limited because there is appetite for the product it provides in Africa Sub Sahara.
In a recent research note on the pan African micro lender, the brokerage headed by Geoffrey Bakwena stated the outfit has an advantage of short turnaround time over traditional lenders.
“Africa Sub Sahara is hungry for credit. The masses have been traditionally not well served by the banks, with long turnaround times for short loans and stiffer terms and conditions. This has presented itself as a perfect opportunity for Letshego,” stated the research note.
Letshego operates in Botswana, Namibia, Mozambique, Swaziland, Tanzania and Zambia and has plans to enter Ghana in the near future.
Operations outside Botswana have continued to contribute more to the bottom-line, though Botswana through its high interest margins continues to be the biggest contributor.
The brokerage noted that the major challenge facing the micro lender is funding, but in terms of profitability it is sound as it collects approximately P40 million from Botswana monthly and paying out about P22 million monthly the company’s business seems to be impeded only by funding.
This makes Letshego Holdings Limited one of the few companies on the local bourse which has been able to grow into the continent successfully.
“Funding continues to be a challenge especially with the appetite for credit showing signs of improvement to pre-recession levels.”
However, despite the strides the company is making in the continent, it still faces problems including operations that face a number of factors and the currency risks.
Stockbrokers Botswana noted that operationally Botswana and Swaziland are the easiest operations especially with collections done through software assistance.
In other countries, especially in the North, operations are more difficult with some involving huge manual paper processing for collections. Tanzania for example is very difficult because it does not even have DHL, cheques travel by bus often.
Stockbrokers Botswana also praised the company’s decision to offload Letshego Guard (Pty) Limited and Letshego Guard Insurance Company Limited to a giant in the stock market saying it will focus on core business.
Under the deal, BIHL, through its subsidiary Botswana Life, was to acquire Letshego Guard and Letshego Guard Insurance Company Limited which are the short term legal insurance agency and a dormant short term insurance company for a P 57 million cash consideration. BIHL is also a shareholder in Letshego.
“It will also help boost profitability as the company will obtain better utilization of assets through higher profit margins in lending than insurance. The average yield on loans is 30% to 40%, second only to hire purchase (approximately 90%),” said the brokerage.
“Even though the legal insurance division was doing well it has lately complained of the high instances of family matters which affected profit margins.”