Letshego nosedives on stock market

Brian Benza
Staff Writer | Friday September 23, 2011 00:00

Microlender Letshego this week continued with its losing streak on the Botswana Stock Exchange (BSE) as selling pressure mounts on the counter against the background of investors' apprehension over the company's future cash flows.

The investors' panic follows reports that government would cease facilitating deduction of microlenders' loan repayments from source starting December 1 this year. Botswana operations contribute over 60 percent to the group's profitability.

This week, Letshego dropped to a year low of 139thebe per share, meaning investors have lost a quarter of the stock value since the beginning of September when the counter was trading at 175thebe per share.

With much of its business coming from loan arrangements with civil servants, Letshego has already advised its shareholders about the government's decision to stop the 10-year old arrangement that has been its cash cow.

The company now has less than three months to craft new ways of collecting repayments on loans, some of which could have tenures of as long as five years.  According to industry sources, Letshego - which now offers macro loans of up to P200,000 - has been collecting at least P66 million per month from government employees in loan repayments.

The revocation is set to dent its P2.3 billion-loan book. 'Letshego Holdings Limited was informed on 31 August 2011 of the intention of the Government of the Republic of Botswana to cease facilitating the deduction of microlenders loan repayments from source effective 1 December 2011,' it said in a cautionary statement.

'Should this revocation come into effect, Letshego Botswana will use alternative methods for the collection of contractual monthly loan repayments. The Board of Directors is engaging with the relevant authorities to obtain more clarity and a resolution to this matter. Shareholders are therefore advised to exercise caution when dealing in the securities of the company.'

Despite the anxiety surrounding the controversial government decision, stockbrokers are still optimistic that the company will find a way around the hurdle and that the stock will rebound again.

'We are experiencing selling pressure on the stock from some institutional investors. We however assign a hold recommendation on the stock pending the outcome of negotiations that the management of the company is currently undertaking,' read a market report from Motswedi Securities.