The allure of East Africa as an investment destination after the conclusion of elections in Kenya and Rwanda last year is expected to give the Bank of Kigali better prospects in its search for a strategic investor.
The bank, which is listed on the Rwanda Stock Exchange (RSE), plans to issue new shares to a strategic investor as it seeks to raise capital to finance the growing business as analysts say the stock is currently undervalued.
Brokers expect the bank’s share to remain stable in the foreseeable future but a rally could be set off by market dynamics. In the 12 months to December, the bank’s shares rose to Rwf300 (35 US cents) from Rwf228 (27 US cents).
“The higher price also helps in negotiating terms with a strategic investor if it goes that route, which looks inevitable. This would translate to the bank issuing fewer shares to reach its capital objective and minimise the dilution of existing shareholders,” said a deal marker.
Market analysts said enquiries from international investors picked up towards the end of last year, with some of them closing deals.
“Some of them have invested in East African markets which promise to perform better this year with electioneering over in Kenya and economies rebounding,” said a market analyst.
He added that the appetite for offshore investors could be met through issuance of more initial public offerings of which there has been a dearth in the region.
RSE chief executive officer Celestin Rwabukumba said tax incentives proposed by the government could spark new issuance of shares by Rwandan firms.
A draft Income Tax Bill that is still being discussed proposes to lower the corporate tax rate from 30 per cent to 25 per cent for five years for companies that float at least 40 per cent of their capital on the RSE. Those that float more than the threshold will pay a corporate tax of 10 per cent.
“Saving that money when you are a listed company is a big saving translating into millions of dollars after the five years,” said Rwabukumba.
Mr Rwabukumba said there were three IPOs in the pipeline. “Preparing them takes time. Once the companies are ready they will come,” he said.
The RSE finished the year on a stronger note with the Rwanda Share index gaining 13 per cent to 135.38 per cent from 119.84 per cent.