KBL shareholder loses P260m in value in two days
Sechaba Holdings, a 49.9% shareholder in Kgalagadi Breweries Limited (KBL), saw its value on the local bourse drop by P264 million between Monday and Tuesday this week. According to the Copyright and Intellectual Property Authority database, the Botswana Development Corporation holds about 32.7% equity in Sechaba, whose primary businesses are its investment in KBL and another 49.9% in Coca-Cola Beverages Botswana (CCBB). Neither KBL nor CCBB, are directly listed on the Botswana Stock Exchange (BSE), but Sechaba’s listing gives insight into the local market’s view of the business.
The BSE market updates this week show that Sechaba, whose share price had not changed since the beginning of the year, lost P1.40 on Monday before shedding another P1 on Tuesday. The losses mean Sechaba’s market capitalisation dropped to P2.02 billion from P2.28 billion in the space of two days.
Market capitalisation is a valuation of a company showing what it is worth on the open market, as well as the market’s perception of its future prospects.
The drop in Sechaba’s market capitalisation comes as both of its investments, KBL and CCBB, were recently dealt blows that are expected to affect their profitability. KBL has been unable to trade since January 4, 2021, after the government instituted another liquor trade ban in response to the rising coronavirus (COVID-19) cases.
The company has since announced a suspension of operations. CCBB, meanwhile, is bracing for the sugar tax, which commences on April 1. The company has described the tax as punitive and discriminatory saying it could result in job losses.
Stockbrokers Botswana research analyst, Malebogo Keleapere said liquor trade suspensions and operations restrictions had led to more investors looking to sell than buy Sechaba’s shares given the industry’s uncertainty. “I suppose the slip in share price is not only occurring now, it has occurred over time with a slower pace,” she said. “The 9th of June 2020 saw a decline of 0.05% in share price and since then when the price moved it was a downward movement.
“However a P2.40 in a week is a huge decline. “I believe the uncertainties around the alcohol industry heightened, hence investors are now reacting. “There is usually a gap between events, news and investors’ reaction (which is) perhaps the reason why the negative impact of the above mentioned issues is only being felt significantly now.”
Other market analysts told BusinessWeek the latest falls in Sechaba’s share price were not linked to fundamentals in the business, but rather bargain hunters testing how low the counter could get before taking positions.
“Sometimes, investors play that game where they are looking at a future purchase of a block of shares and ahead of that, they test or press the price down with small volumes,” a market watcher said.
“The idea is to test how low the price can fall before taking a position. “The volumes this week were rather thin and suggest this could be the case.”
For its part, KBL has said it will keep all operations suspended until the liquor trading ban is lifted.