DAR ES SALAAM, TANZANIA –  The share sales of the Tanzania Breweries Limited (TBL) oversubscribed by 245 % of the number of offers on offer, which an analyst attribute to the brewer’s counter to be undervalued.
Due to this subscription, the East African Breweries (EABL) managed to raise US$76.6 million it was looking for from the sale of a 20 % stake in TBL through an Initial Public Offering (IPO) at the Dar es Salaam Stock Exchange.
Chief Executive Offer of the Tanzania Securities Limited (TSL), Moremi Marwa said the main reason for the TBL’s oversubscription as with most other local stocks listed in the Dar es Salaam Stock Exchange (DSE) was that, the TBL counter is undervalued.
“This is when you compare the EABL which had a PER of 16.3x versus 8.3x for TBL during the offer period, which implies that EABL value is twice as much as TBL, mainly due to lack o liquidity at the DSE,” said  Moremi.
Moremi said the undervaluation which make easy for investors to buy shares of responsible listed firm, can also be seen when one compares TBL’s market price to its fundamental intrinsic value.
“This can also be seen when you compare relatively the price that EABL paid to acquire SBL’s 51 % ownership back in October 2010 at the time when SBL had 15 % market share in the alcohol beverage industry,” he added.
For DSE, Moremi said the progress will mean that 58 million more shares will be transferred from a Strategic Investor to other investors, which implies an increase in free float and hence more liquidity in the TBL counter.
And for the economy, he added, it means more Tanzanians have been given a chance to have a stake in TBL, a listed company which provides fiscal incentives available to investors at the DSE.
According to the public announcement of the IPO, it received applications from 2,081 individuals, body corporates and institutions for a total of 144.4 million shares against the 58.9 million shares on offer. Each share was sold for Tsh 2,060 ($1.30).
Brokers and transaction advisers to the offer said the demand for the shares was from both local and international investors buoyed by TBL’s growth prospects in the Tanzanian market.
TBL’s market capitalization is currently at Tsh595 billion ($376.82 million which according to Moremi, has not changed due to the offer as this is an exercise that necessitated shares changing hands from EABL to other investors.
“No new shares that were issued into the market,” he said and adding, “This may have nothing to do with the brewer’s market share except implicitly by sentiments.”
According to  Moremi, an increase or decrease in market share is rather a matter of Company’s market approach strategies.
The number of offer shares applied by Tanzanian applicants was 32.6 million and the allocated shares were 32.6 million, which is equivalent to 55.24 % of offer shares allocated.   While the number of offer shares applied by East African applicants was 23,600 and the allocated shares were 23,600 equivalent to 0.04 % of offer shares allocated for them.  The number of shares applied by foreign applicants was 111.9 million and 59 million shares were allocated, equivalent to 44.72 % of offer shares allocated.
TBL recent major turnover in the market came out of the transaction where we sold 480,000 shares worth Tshs 970 million which a local investor sold there shares to East African (Uganda’s based) clients.
For the last two weeks, EABL’s shares trading at the NSE shot up 1.1 % to US cents 2, on the day TBL released the IPO results. EABL, which is majority owned by London-based Diageo, sold its 20 % in TBL, which is majority owned by SABMiller – a major South African brewer, as part of a deal to divest from the Tanzania-based beer maker.
The TBL IPO opened on November 6, 2011 and closed on November 25, 2011. Demand for the shares at the DSE remained high in the first week of trading in 2012 with the counter being the top traded stock with a turnover of $220,000 on January 4 and $670,000 on January 5.
The TBL counter is expected to remain active despite the general market indicating a low level of activity at the bourse due to tight liquidity in the economy and high yields of fixed income securities and money market instruments.
The Kenyan brewer went on to buy a 51 % stake in Tanzania’s Serengeti Breweries in order to maintain a presence in the market.
EABL and SABMiller decided to end their eight-year deal where they marketed each other’s products in Kenya and Tanzania, respectively.
The end of the relationship also saw EABL buy back a 20 % stake in Kenya Breweries Ltd (KBL) from SABMiller.
EABL secured a $219 million loan from its parent company, Diageo, to fund the buy-back from SABMiller. Both are now set to battle it out for the Tanzanian market, which offers good growth prospects.
TBL recorded a sales revenue growth of $239 million in the six months to September 2011 compared with $181.1 million over the same period the previous year, which represented an overall increase of 32 %. The brewer’s net profits in the six months ended September 2011, increased by 77 % to $46.2 million compared with $26 million in the same period a year ago.
TBL managing director Robin Goetzsche said the growth had been driven by increased volumes, improved product mix and inflationary price increases over the past year.  The company’s overall volumes in Tanzania also grew by 21 % for the half year, having been flat in the previous period.

Comments (0)

Subscribe to this comment’s feed