Written by Gitta Expedito.
The Rwanda Stock Exchange has a tradition of sharing the daily market report with the public. This helps people who are buying shares on their stock exchange to lock down the best prices for their shares when they are selling or buying. This is because you can see the offers for certain shares and the bids available for the same shares.
My experience with Bralirwa was not much different. I had paid to get the shares at RWF 195 a share, but the prices skyrocketed to RWF 205 a share. I could follow up on the available bids, which were outnumbering the people selling their shares. In Uganda, you go to buy shares in the markets with fingers crossed. you don’t know what's happening. You don’t know whether to adjust your share order to suit the current needs or just wait, and hope for the best with your stockbroker.
Infact, it's common practice that if I see a share in Uganda trading at, for example 20 shs a share, I’ll inform the stockbroker to buy at 21 shs a share, just to be on the safe side.
For example, MTNUG was trading at UGX 181 shs a share by 20th September 2024, and its growth and progress were linear but slow, when the prices suddenly spiked to UGX 197 shs a share. Now, if you had already put in a share order purchase, you don’t know whether to adjust your order and raise your fees or to wait and hope the price will somehow come back down to the ranges you had ordered before, or if someone else will order at even higher prices, thus causing share price inflation. So you cross your fingers and hope for the best.
Nobody wants prices of commodities to increase when they are still in the markets and haven't locked down the quantity of shares they want yet. Of course, if the prices increase after you have bought, then you go to sleep at night with a smile.
I noticed that lots of MTN Rwanda Cell shares were up for sale with no one bidding for them at all. Out of curiosity, I got the MTN reports for the last three years and decided to dive in to understand why MTN in Uganda was so wanted while almost no one lined up to buy it in Rwanda.
Probably due to the market size, the revenue for MTN RW was growing at a very low rate, with reduced profitability as well. Buffett advised that if you are to follow one thread in financial statements, follow the earnings. So I followed revenue and net profit, and I wasn’t so impressed with what I saw, explaining the not-so-impressed investors who wanted out as well. This reminded me of a quote from the classic cinema, The Big Short, where the president of the company exclaimed that his firm was going to be left holding the biggest bag of smelly shite that nobody wanted. From personal experience having a few Airtel shares in my portfolio, you don’t want to ever be caught holding shares of a non-performing company in your portfolio because not only have you endured the losses the company has made, but you may also have to apply a haircut to its share price and sell at a loss.
Back to MTN Rwanda Cell, I wanted to see how the telecommunication giant was to battle the competition of Starlink in the country, seeing that Rwanda was setting itself up as the innovation hub in East Africa, which meant lots of internet. MTN’s Strategy 2025 will see lots of partnerships in the tech sector with businesses, so will businesses that have migrated to Starlink internet still use the other services of MTN, including cloud?
It would be interesting to see the factors that would influence revenue in the foreseeable future. I found myself thinking about franchises, like how one branch of the business can bring in more revenue than the other branches. And so the busiest branch has to overcompensate on behalf of the underperforming branches.
MTN Group wasn’t performing so well, and yet MTN Uganda was on a winning streak. In fact, MTN Uganda now consisted of about 80% of my newly re-balanced portfolio, while the 20% is invested mainly in Bank of Baroda Uganda.
MTN Rwanda Cell was one of those that weren’t performing to the best of their ability and would now face stiff competition with Starlink. Airtel Uganda had also seen some poor performance in the last 12 months, and yet Airtel Bharti, the parent company of Airtel Uganda, had performed so highly in the last 12 months to levels never seen before.
I could defend both opinions: individual picking of stocks or buying the parent company as a whole. If I’d bought MTN Group shares, I’d have to be writing a pretty convincing letter to my investors on why the portfolio isn’t performing so well, and I’d have to give a huge talk on the fundamentals of a business.
And if I’d invested in Airtel Bharti, I’d be getting the benefits not only of Airtel, the telecommunications company, but with the mobile money segment as well. And if I ever buy Airtel shares again, it’ll be in the parent company, Airtel Bharti, not Airtel Uganda, a lesson I learned the hard way, having had Airtel in my portfolio for a few months.
If one is able to identify that the returns of a particular stock are majorly driven from a few regions, one could be able to invest in the publicly listed stock in that particular region, such as with MTN Uganda, but you have to be aware that the laws that apply to that one region may not apply to the other, as seen with MTN Rwanda Cell.
The reverse is also true. Investing in Airtel Bharti would be a better option than investing in Airtel Uganda, given that most of the returns of Airtel are gotten from operations in India and a few other well-performing countries, rather than from Uganda.
This simply means that I have to keep evaluating and re-evaluating both new companies and the ones I’ve invested in that I hold so dear, to always check the fundamentals of the businesses and to ensure that they align with the original reasons I had while investing in those companies or
have become better.