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BTC shares undervalued, opportunity for astute investors- Experts

Publishing Date : 03 December, 2018

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30 November 2019: Investment experts have advised that BTC shares are undervalued in the market given its strong balance sheet, positive growth prospects, extensive coverage and consistent dividend yield.
 

Today, BTC has one of the highest dividend yields on the Botswana Stock Exchange (BSE). An investor who bought shares at Initial Public Offer (IPO) two years ago and never sold their shares, has so far made 33% return on their investment.  “Long term investors should not be moved by the short-term volatility of BTC shares as the fundamentals remain strong for the business. In fact any short-term weakness should be taken as an opportunity by astute long-term investors to increase their holdings.


We have seen it before how some astute investors have taken advantage of BTC share price drop by increasing their holdings and they have been rewarded handsomely when the share price picked up,” says Garry Juma Motswedi Securities Head of Research and Executive Director. Stockbrokers Botswana CEO, Bokete Mokgosi echoes similar sentiments but emphasizes the risk as being driven by retail investors who are primarily concerned with meeting their own liquidity requirements resulting in constant oversupply.


“Perhaps in answering your question let me begin by addressing the volatility the counter is currently experiencing which represents a liquidity risk in the stock. We have observed this as perhaps the most pertinent risk preventing the BTC share price from reaching its intrinsic value. The stock is largely traded by retail investors who are primarily concerned with meeting their own liquidity requirements, resulting in constant oversupply of shares in the market,” notes Mokgosi.


The Stockbrokers’ Chief Executive believes that BTC has made huge investments towards heightening its competitive advantage in the market and thus proves an ideal haven for long-term investors. “BTC is unparalleled in mobile network coverage, estimated to cover 90% of the population. The firm’s network coverage pans across previously undeserved remote areas where competitors have little to no presence,” he highlights.


“BTC’s investment case is supported by strong fundamentals such as convergent product offering – Given BTC’s unique position as the sole fixed network operator, the firm is able to offer its fixed, mobile, and other products and services in a convergent portfolio. Leveraging on this competitive advantage is a key component of its commercial strategy.  BTC is a highly cash generative business and returns profits to shareholders with a 50 – 65% dividend pay out policy. The balance sheet is of low risk with no gearing which provides ample capacity to raise debt if need be.”


“The volatility and inefficient pricing of the stock is indeed an opportunity for investors to pick the shares up at extremely cheap levels. We expect price discovery once the counter is open for trading to non-citizens. Therefore, it is best investors buy the shares now while they are extremely undervalued.  BTC also offers tremendous value, as its net dividend yield at 11.7% is more than double the market’s weighted net dividend yield of 5.5% as at 23 November 2018,” Mokgosi concluded.

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