On Thursday, Crystal telecom, a wholly owned subsidiary of Crystal Ventures Ltd (CVL) and a shareholder in MTN Rwanda issued an IPO on our nascent bourse.
This IPO aims at raising some $41 million, which according to CVL executives, will be used in investing into new ventures such as energy. Overall 75% of these shares will go to institutional investors and 25% to individual retail investors, both in Rwanda and East African Community (EAC).
In November 2010, Bralirwa opened the queue on the Rwandan stock market as the first local company to list, and then Bank of Kigali (BK) followed. But the difference between these two and the latest Crystal Telecom IPO, is that in the case of Bralirwa and BK, it was government offloading its shares and not private shareholders.
Therefore, in essence, Crystal telecom goes down in history as the first privately owned local subsidiary to list its securities on the market.
It’s probably difficult to understand the benefits of investing into these assets until you have taken this risk. Five years ago when Bralirwa issued its IPO, many of us did not understand this concept. The jargon was complex and the thought was alien to our ears.
Though the IPO was eventually oversubscribed, thanks to the extensive educative campaign, the majority of local investors remained skeptical about its returns. They equated it to throwing money in an open ditch with no guarantee of good returns.
However, the few that took the risk ended up with grinning faces, for the returns were simply handsome. Bralirwa’s initial share price was going for Rwf136 a share. After only two years, the share price had shot to almost Rwf850 a share, growing almost 6.2 times the initial price within a span of two years.
To simplify it for you, if you bought shares worth Rwf1 million during the Bralirwa IPO, you got approximately 7352 shares. If you sold these shares after 2 years when the price was Rwf850 a share, you probably got Rwf6,249,200.
Compare these returns to what you would earn if you put your Rwf1 million on a fixed savings account in any of our banks. The maximum annual interest rate such an amount would fetch is about 5% per annum, meaning that at the end of two years, the accrued interest is no more than approximately Rwf200,000. On the other hand, the person who bought his Bralirwa shares earned a cool Rwf5 million extra.
This is why we should pick interest in this MTN/Crystal Telecom IPO. It is going for a reasonable price of Rwf105 a share. Chances are that it will be oversubscribed because IPOs for sectors like telecoms, breweries or any fast moving products tend to attract a high appetite.
This IPO is anchored on a solid company, MTN Rwanda. For the past decade or so, MTN has been posting strong growth guaranteeing dividends as well as management fees for its shareholders. The only undoing, going forward, might be increased competition.
But you see, phones have become part and parcel of our lives. They are as essential as food or clothing. Each phone call you make or sms you send or data services used on MTN network, you will be increasing the share price of this security and hence better returns for you as an investor.
My prediction is that after allotment and subsequent listing on the secondary market, the share price will rise three fold or probably more, which definitely would be a good return on investment.
But this initiative shouldn’t be seen from the prism of return on investments alone. It should also be seen from the context associated with the pride of having a vibrant securities market – the foundation of any serious economy. We need to give our economy some Agaciro – the dignity to be seen as an economy that meets the basic standards of a vibrant economy. You cannot speak of an economy where the capital market is dormant or non-existent.
And it’s not only about easy capital mobilisation for the private sector or attracting foreign direct investments—it’s also about the high scrutiny associated with listed companies. This scrutiny builds a strong culture of corporate governance (which many of our local companies lack) and boils down to overall economic emancipation.
In the modern world, a non-listed company is almost a non-existent company. You are either listed or you have no voice in the corporate world.
When you bring it to our situation, you would be right to say that the only companies we can speak of, in our economy today are three – Bralirwa, BK and now MTN Rwanda, after the crystal telecom IPO.
That is why as a proud Rwandan, you need to rush and get yourself a slice of this pie before others eat it up.