22 Jun 2017

After a tempestuous take off, Botswana Telecommunications Corporation Limited share price has finally stabilised.

The performance of the shares staggered weeks after their initial public offering (IPO), at some point plummeting to below the opening price of P1 per share and this created fear and panic among their holders so much that some of them caused a stampede in the market in an effort to dispose them. The situation has however since changed as the shares were now doing well in the market.

The BTCL public relations manager, Mr Golekanye Molapisi attributed this to investor confidence in their stock. “In our view, the appreciation of the BTC share price in the Botswana Stock Exchange is validation or a sign of confidence investors have in our stock,” he said in an interview recently.

As of May 17, the share price reached a high of P132 per share, while at the close of business on June 16, BTCL share cost P128, according to information from BSE.

However, an economic expect, Mr Ishmael Radikoko, explained that the increase or decrease in share price was controlled by demand and supply forces, which were also controlled by many other factors.

In the current scenario, it is obvious that there was more demand for the shares, which exceeded the supply, said Mr Radikoko, who is also a lecturer at the University of Botswana.

Basically, he said there were more buy orders than sell orders for the shares. This increase in demand, he explained could be attributed to the fact that the dust now has settled regarding the uncertainty on where the company was headed.

“First we have seen the reshuffle in the top company management team where there was an installation of the new CEO, Mr Anthony Masunga after the departure of Mr Paul Tailor.  Ms Lorato Boakgomo-Ntakhwana also replaced Ms Daphne Matlakala as the chairperson of the board and she is deputised by Mr Gerald Nthebolang,” said Mr Radikoko.

He said another new addition to the Board was Mr Maclean Letswiti. These changes to the management, according to Mr Radikoko seem to have worked in instilling confidence to the market and as such pushed the company share price to winning ways.

Secondly, he noted that the confidence in the market was revamped when the company announced positive interim results, which showed that the losses experienced in the last financial year ended 31 March, 2016 of P371 million, which emanated from increased expenditure due to impairment of company assets were being reversed.

To add to this positive news, Mr Radikoko said earlier this year the company released a cautionary statement that revealed that the profits for the years would be positive and even higher than what was anticipated as shown in the company’s listing prospectus.

Thirdly, according to the UB academic, the appointment of a market maker as a buyer and seller of last resort also helped in terms of improving liquidity of the shares although it could not be said the liquidly problem was no longer existent.

In general, Mr Radikoko said the confidence in the market regarding the share price had been boosted and therefore demand for the shares had increased and this was what was driving the price in an upward direction.

“The improvement in liquidity of the share was also helping in true price discovery of the shares so that ultimately the share would trade at a more efficient true intrinsic value, which consensus estimate have put it around P2 per share,” he explained.

As for the share price sustaining their appreciation trend going forward, the UB academic said this would be dependent on the signals regarding the company as they were being transmitted to the market.

“If they will remain positive like, then the demand for the shares and hence their price will continue to appreciate going forward and headed to its true intrinsic value of around P2.”

He further said the fact that BTCL was the first telecommunication company to list in the BSE had a positive impact in terms of the volumes of shares which were bought, especially at an IPO stage which lead to an oversubscription of the shares.

This was partly due to the heavy marketing of the share by government to the public, but was also due to the fact that inventors were looking at diversifying their portfolios with a techno stock, said Mr Radikoko.

“As we know nowadays many people are interested in technology so portfolio managers believe that including technology stocks in their portfolios could boost their portfolio performance and as such BTCL listing was a welcome development,” he said. BOPA