08 Aug 2016

Batswana, who have bought Botswana Telecommunication Corporation Limited (BTCL) shares, are advised not to panic, but hang in there as the falling share prices may bounce back in future.

A University of Botswana academic, Mr Ishmael Radikoko said in an interview that the shares had since plummeted to below the opening price of P1.

Mr Radikoko, however, said the stock would bounce back to this basic value which means long term investors could benefit from future price appreciation. 

“My take on the share price right now is that it is deeply undervalued but my analysis reveals a target price of about P1.80,” he said.

 So far the performance of the shares has not been impressive at 52 weeks high of P1.35 which they reached only in the first week of trading, he pointed out.

The financial expert said the shares were currently trading at the 52 weeks low of P0.93 at the close of trading on August 03, 2016, and that they had been below IPO price of P1 for quite some time now. 

The shares were also very difficult to sell or illiquid in technical communication, as they could go for days without being actively traded in the market, he added. 

He said his optimism was based on the fact that market forces would play out naturally to restore the stock price to equilibrium and most efficient level.

As such, he explained that it could be the right time to buy the shares when they are cheap but not to expect short term capital gains, but in the long term capital gains could be realized. 

His worry was however that the intervention of Botswana Privatization and Asset Holding (BPAH), if ever it will start discharging its mandate as buyer and seller of last resort, though it will be helping in restoring lost liquidity in company shares, will manipulate the stock price. 

“The true price of the share might never be reached because they will have more bargaining power in the case of excess supply of shares in the market by bargaining to buy them at a very low price from the stranded sellers and in case of excess demand they might sell them at a very high price to the disadvantage of desperate buyers,” he said

Basically, he said there was supply-demand imbalance for the shares, with supply exceeding demand in the market.

Mr Radikoko explained that the price of share was largely influenced by demand and supply forces which are in turn influenced by many other factors. 

If supply exceeds demand, which is the case with BTCL shares, the price is expected to go down because buyers through stock brokers and other members of the stock exchange have more bargaining power than the selling counterparts, he said. 

This, according to the UB academic, therefore causes buyers to bid for lower price for the shares; hence driving the price down. 

Such a factor, he said, could be the most cause because the results of BTCL Initial Public Offering (IPO) showed that 90 per cent of shareholders at the end of allocation of shares to subscribers were actually retail investors and 10 percent institutional investors. 

This he said meant that most of BTCL shares were currently in the hands of ordinary Batswana most of whom, unlike institutional investors, might not possess expertise in the stock business; hence any negative information about BTCL shares would make them panic and sell without much scrutiny.

 BPAH had not started discharging its mandate in that regard was that the market making rules had not yet been approved by NBFIRA. 

Because of this hiccup, he said the shares continued to be illiquid (difficult to sell) with more sellers than buyers and oversupply of share causing the price to slide in a downward trajectory.

Mr Radikoko said the second cause of poor performance by the share was based on the company’s (BTCL)  fundamentals.

 Furthermore, Mr Radikoko said the departure of the CEO of the company, Mr Paul Tylor also sent negative signal to the market.

Meanwhile, BTCL acting CEO Mr Anthony Masunga recently told a local newspaper that the company would continue to be profitable and that shareholders should not despair. 

He assured them that they had invested in the right company as BTCL was very solid with a very strong track record; it is semi-private and it can only grow, he said. Ends