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BTCL listing rallies the DCI

The Botswana Stock Exchange’s Domestic Company Index (DCI) seems to be on its way up following the successful listing of Botswana Telecommunications Corporation Limited. The DCI surged by 0.63% on Friday 8th to end the day at 10, 276.40 points up from the previous day’s 10, 211.18. The surge helped reverse losses that have pulled down the index to 3.8% in the first quarter of 2016.

The rally was led by the newly listed BTCL which appreciated by 30% on the first day of trading. The buoyant DCI picked on Tuesday again with the help of BTCL and Choppies, with the respective shares appreciating about 5% and 1% respectively.

It has been a rough start for global equities worldwide following a global markets rout that wiped $6 trillion worth of equities valuation early in 2016 as the world’s largest economy fumbled. The precipitous fall in the Chinese equities led to a global contagion resulting in major markets taking a hit and sparking fresh concerns that a financial crisis is looming.

The BSE’s DCI opened the year at 10,610.14 points, and from there on the DCI has been in decline for the first quarter as it ended at 10,2o2.64, representing a decline of 3.8%. Nonetheless during the first quarter, the BSE realised trades valued at P702.2 million after moving around volumes of 187.1 million shares. During the Q1 period, the top 5 trade companies in terms of value were Letshego (P339.1 Mn), Sefalana (P91.3 Mn), Choppies (P65.4 Mn), BIHL (P58.1 Mn) and FNBB (P41.7 Mn).

Ultimately these five accounted for 84.8% of total turnover during the quarter.

The top 5 gainers in the first three months of the year were led by Cresta, the leading hotel operator in the country. Its share price has appreciated by 6.6 percent. Following closely behind is the Catherine Lesetedi Letegela’s led Botswana Insurance Holdings Limited which has advanced by 5.3 percent on the backdrop of impressive earnings. The third spot has been occupied by New African Properties which outperformed all listed property companies as its share price jumped by 4.2 percent.

Other property listed companies include Primetime and RDCP which also recorded positive share price growth at 2.4% and 2% respectively. Chobe, another tourism outfit which operates luxurious lodges and camps, claimed the 4th spot as it grew its share price to 2.9%.

On the losing side, the pan-African financial services provider took a hit on its share price despite hitting the billion pula mark in revenue. Letshego has seen its share price plummet by as much as 13.4%. Choppies, the retail giant that’s on an expansion plan, was the second biggest loser as its share price tanked by 6.8 percent. The third spot is taken by FNBB, as the largest bank by value in Botswana saw its share price decline by 6.3 percent. Engen did not do well as its share price contracted by 6%, making it the 4th biggest loser. The 5th position was a tie between Sechaba and Stanchart with both companies losing out 5% of share price value.

The usually inactive Foreign Domestic Index has been on a winning streak as the index recorded positive growth of 0.4%. The index was rallied by Galane Gold which shot up by 80% as gold continues to perform well despite slump in other commodity prices. Magnum Gas and power followed with a 25% share appreciation while another trailblazer came in the form of Lucara Corp which has been riding high since laying claim to the world’s second largest diamond at its lucrative Karowe mine.

Lucara’s share price has appreciated by about 22% in the first quarter of the year. While other companies trading under the foreign counter remained largely flat, Botswana Diamond and Shumba energy slid down to shed off 15% and 8% of share price respectively.

It promises to be an interesting second quarter for the BSE, with the first visible impact already coming from BTCL which listed 1.05 billion issued securities bringing the value of the BSE to P49.6 billion. The BTCL IPO which was oversubscribed has brought in 50,000 domestic investors, adding to the already existing 22000 investors. The market sentiments points to further appreciation in BTCL shares amid sustained demand against supply, with the shares having already appreciated by 35%.

Furthermore, FAR property will also debut on the BSE in May. The company will list 80 million units, representing 21 percent of the company’s shares. Far Property Company’s shares will begin trading at P2.57.

However, the latest estimates from analysts at Trading Economics points to a challenging year for the BSE. They project the BSE’s DCI to decline to 10,000 points in 2016 Q2, followed by 9620 points in Q3 and a further decline in Q3 that will leave the index at 9390 points. “We model the past behaviour of Botswana Stock Market (BSE DCI) using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations. The forecast for – Botswana Stock Market (BSE DCI) – was last predicted on Wednesday, April 13, 2016,” read part of the note from Trading Economics.

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Pula smiles at COVID-19 vaccine

25th November 2020
COVID-19 vaccine

A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.

With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.

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Choppies high on JSE rollercoaster volatility

25th November 2020
CHOPPIES

After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.

Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”

Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.

However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.

The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.

In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.

“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.

This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.

On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.

However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.

Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.

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Foschini-Jet merger, a class and rivalry conundrum dissection

25th November 2020
Foschini

Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.

According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.

The two entities are South African retailers whose services stretched to Botswana shores.  Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.

South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents.

However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.

When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.

“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.

The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.

This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.

What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.

“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.

Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.

CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.

Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.

“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.

CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.

Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.

“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.

According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of:  i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.

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