Saturday, May 28, 2022

Stockbrokers Botswana recommends ‘hold’ on BIHL counter

Local brokerage firm Stockbrokers Botswana (SBB) has recommended a ‘hold’ on the Botswana Insurance Holdings Limited (BIHL) counter despite the challenges the stock faces.

SBB, which is headed by Geoffrey Bakwena said the 25.7 percent growth the stock realised in the past year was a good performance, but said it believed the price has diminished any upside potential.

“The fundamentals are good, but in our view the upside potential is only 8.0 percent,” the brokerage said. “We recommend a hold on the counter.”

The BIHL stock moved from P8.35 this time last year to the current P10.50 per share.

The company, which is said to be the second-largest domestic company after Debswana, owns Botswana Life, which controls over 80 percent of the market and Bifm, the asset management division that currently manages P17.6 billion and is estimated to be at least 70 percent of the market share.
Over the years, the group has however been dogged by controversy with the older one involving managers opting for the exit and the recent one being the high-profile departure of Regina Sikalesele-Vaka.

Sikalesele-Vaka said she was concerned by Sanlam’s “systematic release of excess┬ácapital by declaring dividends” that┬áare likely to affect the future┬ágrowth of the company. Sanlam owns 53 percent of┬áthe Botswana Stock Exchange (BSE) quoted outfit.

About 18 months ago, BIHL was led by three people; Victor Senye (Bifm CEO and BIHL co-CEO), Sikalesele-Vaka (Botswana Life CEO and BIHL co-CEO) and Nthisana Philips as Bifm Deputy CEO.
All the three have left. Sikalese-Vaka was the last to leave having served as the Group CEO for only one year.

SBB said the departure of three leading executives in a short time is a “concern to us” and warned that at the time when the company is defending existing business and expanding through new business lines, it is best to have leadership stability.

“The BIHL group is well resourced and capitalised. In our opinion its remuneration is good. Hence we believe it is highly unlikely that these executives left because of financial dissatisfaction,” Stockbrokers said.

“We believe this might be an indication of a general sense of dissatisfaction at the executive level; possibly poor board management relationship or serious differences with the philosophy of the company,” the brokerage added.

SBB is of the view that in the medium term (three to five years), the insurance and asset management businesses will dwarf the new businesses in contributing to the bottom-line.

Stockbrokers said it expected a moderate growth into the long term on the Bifm business side. The space in which the asset manager operates in is becoming very competitive and is expected to grow moderately.

In the last four years the assets grew from P11.75 billion in 2006 to the current P17.6 billion. This growth averaged 10.6 percent per year.

For Botswana Life, SBB said it expects a minor growth on long term insurance business in the long term.

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