By Adama Wade.
The wave of IPOs on the BRVM side of banking entities has generated a real enthusiasm in the last few years among both institutional and individual investors. On the occasion of these IPOs, some banks have, it is true, made valuations by the method of multiples of significant equity, 2.9 to 3 times for the highest.
But it is important, by analyzing more closely the performance of these securities once quoted, to make a clear distinction between the operational banking entities (BICICI, Ecobank Ivory Coast, SGBCI, Coris Bank, etc.) and the holding companies. banking groups, the most significant of which is the BRVM being Ecobank Transnational Inc (ETI).
This distinction is due, among other things, to two main reasons:
On the one hand, the fact that very few investors, especially non-institutional ones, really make the difference between the consolidated accounts of the holding companies presented to them to make them look good in the future and those intrinsic to the holding companies themselves. same.
The accounts of the latter, it should be remembered, include as main sources of revenue only the dividends received from their subsidiaries and the technical assistance costs invoiced to them, which are now the subject of a special attention from the regulators.
As for their expenses, in addition to those related to their salaries, the financial expenses related to the debt of these holding companies, either to capitalize their subsidiaries or to retrocede them, are often the main item. As a result, a banking group may present consolidated accounts with largely positive net results and the holding company may be in a loss position, thus leading to its inability to pay dividends on its listed securities. This situation has often been at the root of the frustration, disillusionment and sometimes even despair of small bearers who have failed to make this distinction.
On the other hand, the difficulty of these groups to develop a coherent “story” for the listed title and especially their inability to execute the strategy likely to deliver this story in the long term. Although the weakness of the liquidity of the capital markets in the WAEMU zone can be perceived as a distortion factor, it should always be remembered that the price of a listed security reflects first and foremost the expectations performance of their holders. They therefore need to understand the real performance factors of the listed entities, and appreciate the ability of the management teams to exceed their expectations, consistently, at the risk of having a total disconnect between the performance of the title and that of these groups. . Operating entities (banks) being more localized and closer to the reality of their investors, are therefore more advantageous than holding companies, covering several geographical areas, perceived as complex and therefore more difficult to decrypt.
As a result of all the above, the situation is rather classic: certain IPOs are being traded at very high prices, thus offering their issuers the opportunity to cash in significant capital gains, and then the stock price does not know, on average, only a downward slope, leaving many investors without possibility of making any gain over time.
Evolution of the ETI share, the main banking holding company at BRVM- Source: Official bulletin of the rating. BRVM
At the UEMOA level, some banks still operate in regional holdings outside ETI: this is the case of Coris, the Banque Centrale Populaire group, Oragroup, to name a few.
We also learn that ORAGROUP is considering an IPO soon for the partial exit of its current shareholders from its capital: A FALSE GOOD IDEA?
It will be up to investors to appreciate.
