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Outlook
With margin compression plaguing most unsecured lenders, Letshego will need to roll-out new products to stem further declines in NIM’s. On the upside, Letshego is well placed to do so, as they have sufficient cash reserves of USD 30million on deck. With the roll-out of the TCS system we expect the introduction of new products to gain traction. Furthermore, the roll-out of the new banking platform is expected to enhance disbursement of loans to between T+1 to T+3. As transactional income becomes a more important source of income to the unsecured lending giant, Letshego will be able to leverage its over 250,000 strong customer base to offer higher margin financial solutions. We envisage the use of agents as the next piece in the puzzle towards Letshego’s transformation to a deposit taking institution. Although such developments might be several years in the pipeline, Letshego’s attempt to procure deposit taking licenses in several countries underscores our predictions, especially as its banking licenses in Mozambique, Rwanda, and Namibia permit the business to offer debit card facilities to its deposit customers. Letshego’s recently announced buy-back should further propel the stock to historic highs, as we expect a limited free-float to swing the investor pendulum in favour of investors with a longer investment horizon.
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Stockbrokers Botswana Ltd coverage ( Letshego Holding Company Limited FY 2014 results)

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