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Thursday 17 January 2019
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Uncovering Letshego’s hidden troubles

Letshego Namibia’s failure to meet its intended listing goals on the Namibian Stock Exchange is a sign of deep underlying skepticism that Namibians have towards new banks, said a banking expert.
Speculators also claim that the closure of SME Bank has dented the confidence of Namibians as far as new banks are concerned, adding that it is most certainly one of the factors that swayed the results of Letshego’s plans.
Through the listing, Letshego expected to raise approximately N$470 million but it fell short of N$288 million. More than half of the free float was gobbled up by institutional investors, a clear sign that individuals were reluctant to risk their cash.
Over 3,600 qualifying applications, valued at a total of N$182 million, were received during the four week share offer period.  Members of the public and non-institutional investors contributed N$40 million toward this total, with the remaining N$142 million being raised through offers from leading institutional investors. Post listing, Letshego Holdings Limited, the majority shareholder in Letshego Namibia, will reduce from 85% to 79%.
Although the company deems the result of the Initial Public Offering to have been successful, experts have contrary views, especially after Letshego extended the deadline under the disguise that the applications were overwhelming and also its decision to lower the share price.
“If the applications were really overwhelming as they claim then there should have been no reason to extend the deadline or even lower the share price. In fact, what would have made sense was if they had extended the deadline and increased the share price,” said a stock brokering expert who opted to speak under anonymity.
A press release issued by Letshego reported last month that the extended Initial Public Offering (IPO) for Letshego Namibia was granted at the request of the Namibian public who felt the initial subscription period was too short.
Letshego Namibia at the time extended their IPO and reduced the share price offer from N$4.70 to N$3.80. This meant that all individuals who applied for 20 percent of company shares available at the N$4.70 price, were awarded 23.5 percent more shares based on the reduction in share price.
According to the expert, failure to meet its initial target also indicates that Namibians are not comfortable with Letshego, a micro-lender by DNA, becoming a fully-fledged bank.
“One would have expected investors to look at the Letshego shares as a scarcity premium that must be bought instantly but it was not the case. The market sentiments really say a lot about this specific IPO,” said the expert.
The expert also said chances are slim that Letshego will meet the new Namibian asset requirements before the deadline.
Finance Minister, Calle Schlettwein, disclosed last week that changes to regulations on domestic asset requirements to lift the domestic asset thresholds from 35 to 45 percent overtime.
The threshold will be raised to 40 percent by January 2018, 42.5 percent by April 2018 and 45 percent by October 2018.
Namibia has around N$110 billion invested in South Africa in the form of pension funds, long-term insurance and other investments.
The company offered 20% of its shares for sale as part of the licensing requirements of the Bank of Namibia to increase the level of Namibian ownership of Letshego Namibia.
On listing, Letshego Namibia’s market capitalisation will be N$1.9billion which represents 6% of the NSX primary listings market capitalisation.
Letshego Namibia is a registered bank and micro finance group whose business activities are similar to the overall Letshego Group.
The net asset value of Letshego Namibia was N$1.6 billion at June 30, 2017 and the targeted market capitalisation on listing is N$2.35 billion. As at June 30, 2017, the total assets of Letshego Namibia represented 24% of the group’s total assets and it contributed 40% of the group’s pre-tax profit and 44% of the profit after tax.
Letshego’s board of directors will consider whether the listing proceeds will be distributed to shareholders or whether the cash should be deployed in the business. Letshego Namibia opened its doors in 2002 as Edu Loan Namibia, providing consumer and micro-lending services. In August 2008, Letshego Group acquired 100% of the company, soon after which the company re-branded to Letshego Financial Services Namibia.
Letshego Group is the largest indigenous Botswana Stock Exchange (BSE)-quoted company with a current market capitalisation in excess of P5 billion that places it in the top 40 sub-Saharan Africa companies, excluding South Africa.




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