Crystal Telecom’s profits dropped in the half year to June after its key business, MTN Rwanda settled a $8.5 million regulatory fine.
But the fine, though disappointing to shareholders, could lift the outlook for the stock at the Rwanda Securities Exchange.
The counter has shed 23 per cent of its value — from Rwf90 ($0.10) to Rwf68 ($0.08) — since the Rwanda Utilities Regulatory Authority imposed the penalty in May for MTN Rwanda’s hosting of its IT system in Uganda. Rwanda law requires telcos to host their infrastructure in the country.
Crystal Telecom whose only business is to manage the 20 per cent stake in MTN Rwanda reported $1.1 million (Rwf985 million) loss in the first six months of this year. Last year, the telco reported $533,440 (Rwf400 million) profit during the same period.
In a statement Crystal Telecom management said it is betting on the strong performance of MTN Rwanda to return it to profitability in 2018.
“Notwithstanding the effects of the fine imposed MTN Rwanda recorded a strong performance during the period and management anticipates a strong performance for the full year,” according to a statement circulated by the RSE.
It has been a mixed bag in the Rwanda bourse as companies announce their half year results with Bank of Kigali stock gaining and Bralirwa remaining flat.
Buildup in demand
Bank of Kigali share price picked from Rwf228 ($0.27) in January 2017 to trade at Rwf280 ($0.33) after releasing the best results in the banking industry in the first six months ending June 30, 2017. This lifted the performance of RSE by 5.8 per cent.
Deal makers say there is a buildup in demand for the Bank of Kigali shares after the lender posted solid results on one hand and its positive outlook on the other.
The bank is diversifying business to spread risk and grow profits with its insurance subsidiary posting profits in its less than a year operations, which raises hope for investors seeking to grow their wealth.
“Currently demand is chasing limited supply,” said managing director of brokerage firm, Baraka Capital Davis Gathaara, The value of I&M Bank Rwanda stock which started trading on the RSE on March 31 has plummeted by 14.5 per cent from Rwf110 ($0.13) in April this year to trade at an average of Rwf94 ($ 0.11) as of September.
The I&M Bank Rwanda managing director Robin Bairstow however said there is nothing peculiar about the stock value of the bank share, blaming the RSE for bringing down the share price market value.
“The share price of I&M Bank does not reflect the underlying performance of the organisation. We have submitted solid half year results ending June 31,” he said.
I&M Bank Rwanda reported Rwf330 million ($392,138) drop in its net profit from Rwf3.4 billion ($4 million) posted in the first half of 2016 to Rwf3 billion ($3.6 million) during the period under review in 2017.
The share price of the listed beer and soda maker stabilised at Rwf125 ($0.14) on September 26, after shading 7.4 per cent value from Rwf135 ($0.15) in June.
The brewer’s half year profits dipped by 3.8 per cent to Rwf41.3 billion ($48.8 million) from Rwf43 billion ($50.8 million) in the same period last year, largely on a drop in sales volumes and serving of debt.
But servicing of a debt the brewer borrowed to finance its expansion plan and introduce new products is also drinking up Bralirwa’s profits.
The poor performance of the stocks, according to deal maker is also a result of investors shifting their funds from equities to government securities as investors seek better returns.