Letshego’s business model comes under scrutiny

06 October 2017
Simonis Storm Securities (Simonis) said it is surprised that Letshego Holdings was unable to raise at least 50 percent of its Initial Public Offering (IPO) value.
The company, which listed on the Namibian Stock Exchange on 28 September, had hoped to sell 100 million shares for N$470 million at an initial offer of N$4,70 per share, but only raised N$182 million despite reducing the share price to N$3,80, a few days before the offering closed.
Members of the public and non-institutional investors bought shares worth N$40 million, while the remaining N$142 million was raised through offers from leading institutional investors.
“We believe that this is an indication of the market uncertainty around the company as a whole and its strategy going forward,” said Megameno Shetunyenga, an analyst at Simonis.
He said the proposed change in business model (retail banking), requires a lot of experience and knowledge.
“Letshego also has a 90 percent Government employee’s exposure.”
There was further uncertainty around the forecast numbers provided in the IPO prospectus, Shetunyenga added.
Letshego Namibia’s market capitalisation stood at N$1,9 billion upon listing, representing six percent of the NSX’s primary listings market capitalisation.
IJG Securities Analyst, Dylan van Wyk, said the company’s reliant on Government Deduction Codes for their collections posed a challenge.
“These codes have been issued for a five-year term, after which they need to be renewed. If the facility is not renewed in 2022, the business might face increased credit risk and much higher non-performing loans. Lastly, due to the historical business model of offering payroll loans to Government employees, Letshego has high credit concentration risk, with 99,6 percent of the loans concentrated in the Government sector,” he said.
Despite this, van Wyk recommended that investors must buy the shares.
Letshego CEO Ester Kali said in an interview that the listing was a process that they had embarked on in order to give power to the ‘man on the streets.’
She said the listing was part of the company’s agenda towards financial inclusion.
“I am happy that we have achieved that.”
She said 3600 previously disadvantaged Namibians had bought shares in the company. “And that is what financial inclusion is all about.”
Despite not meeting the expectations, Kali said she was overwhelmed by the response to the listing.
“We did not expect to receive this many retail customers. This was above our expectations.”
She said the institutional investors did not come on ‘strongly’ because the country was ‘going through a tough time.’
Given this scenario, Kali said the company has something to prove going into 2018 when it releases its financial results.
Talking about venturing into banking services, Kali said Letshego has taken a careful approach on how it will launch its banking services.
“We have already started launching internally. We have started with some of our customers and staff to make use of our products. So far, we have been trying to resolve any issues out there. We also invited more than 500 customers to come and test and we are doing great.”
The company launched its saving products during the Windhoek Industrial and Agricultural Show taking place in Windhoek this week, Kali said.


The Windhoek Observer is an English-language weekly newspaper, published in Namibia by Paragon Investment Holding. It is the country's oldest and largest circulating weekly.

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