African Alliance | Securities

Bralirwa IPO well oversubscribed (19Jan11)

Yesterday, the Bralirwa IPO results were released that showed a high subscription rate. The IPO hoped to raise USD 29.5m, and attracted applications worth USD 80m, a subscription rate of 274%.

As expected, the highest subscription rate has been among international investors (530%), followed by Rwandan (175%) and East African (259%) fund managers. Bralirwa staff and distributors subscribed for 103% of shares allocated to their pool, while retail investors had a 129% subscription rate.

In terms of the allocation, Rwandan retail investors would be allocated their shares in full, at the expense of other retail investors who would receive 40% of the shares that they have applied for.

The allotment for institutional investors is expected to be largely proportional of what the subscription rate was in the particular pool, so international investors could be expected to be allocated about 19% of the shares that they have applied for. This process is expected to be completed by 20 January, in time for the dispatch of Central Securities Depository Statements which will be sent to all applicants on 24 January.

Listing and commencement of trading of Bralirwa shares on the Rwanda Stock Exchange is planned for Monday 31 January 2011.

Analyst comment (extract from African Alliance Bralirwa IPO note dated 25 November 2010):

Bralirwa’s long presence in the country and access to leading brands from the Heineken and Coca Cola companies made Bralirwa a leading local producer of beer and beverages. Despite the recent entry into the market of local and imported brands, we expect the company to maintain its strong position in the market. While management expects some market share erosion, this is unlikely to have a material impact on the company’s outlook.

The beer and beverages consumer market is expected to grow on the back of increasing discretionary incomes, allowing consumers to purchase more of "aspirational” products such as beer and mobile phones. The current 1.5mhl traditional beer market will be the key focus for Bralirwa management to ensure that these consumers migrate to Primus.

Based on our DCF model, we value Bralirwa at RWF 163.02 per share, a 20% upside to the IPO offer price, and place a BUY recommendation on its shares.

According to an investors’ note by African Alliance Securities, Rwandan retail investors will be allocated their shares in full, “at the expense of other retail investors who will receive 40 per cent of the shares that they applied for.”

Ref - http://www.businessdailyafrica.com/High%20demand%20locks%20out%20Kenyans%20from%20Rwanda%20IPO/-/539552/1092472/-/t8dk5e/-/index.html

Refer to:
http://www.mbeagroup.net/index.php?option=com_content&view=article&id=80:rasseries-et-limonaderies-du-rwanda-ltd-bralirwa-initial-public-offer-and-listing-on-the-rwanda-stock-exchange&catid=44:press-releases&Itemid=143

t[quote=Liv][quote=DOM2002]But the the press release from MBEA Rwanda who are the Lead transaction advisors is the one specifying that the retail investors will get 40% of the shares allocated to the retail sub pool. [/quote]


If this is true that means Other East Africa nationals might get a bigger allotment than 40%.

Doing the math below.... they will actually get 59%. That will be great news.

Rwanda retail - 60% of Retail shares available 27 mln
Total retail shares available (27/0.6) 45 mln
Retail applications =129% of 45 Mln 58 mln
Rwanda Applications 26 mln

Remainder for East Africa nationals - retail (45-26) 19 mln

Applications East Africa nationals Reatil (58-26) 32 mln

Allotment Rate percentage (19/32*100) 59%
[/quote]
that would be good news