E-Malt.com News article: Rwanda: Heineken Bralirwa’s initial public offering generates excitement in the country

Bralirwa's initial public offering - Rwanda's pioneer equity product - has generated excitement in the country, with prospective investors eager to claim a stake in the giant brewer and soft drink company, All Africa reported on December, 13.

The company's shares are trading at a bargain offer of Rwf136 ($0.2) each, compared with a fair value of Rwf163 ($0.25), according to a research report by African Alliance, a fund management and stock brokerage firm that is also a broker for the Bralirwa IPO.

The Rwandan government is offering its 25 per cent shareholding in the company to the general public - an equivalent of 128.57 million shares from which it hopes to raise $29.5 million. The majority shareholding is held by the Heineken Group, at 75 per cent.

Analysts are counting on Heineken's management role and robust financial performance over the past three years, to bring in good returns for investors.

"By virtue of its global experience and reputation in the beer and beverages business, Heineken Group's leadership is a vital factor in Bralirwa's future performance," said Kenneth Kitariko, the general manager of African Alliance Uganda.

"Remarkable growth in revenues of 26.8 per cent and 136 per cent in earnings per share over the past three years are attractive to investors."

Also, Bralirwa's impressive dividend payout ratio is another attraction for investors. This ratio, subject to financing requirements was 100 per cent last year and 75 per cent in 2007. The IPO closes on December 17.

Established in 1957, Bralirwa has enjoyed the monopoly in Rwanda's soft drinks and beer sector, a factor that has helped the company deepen its brand loyalty. It controls the majority beer market share at 94 per cent.

But analysts say stiff competition from beer importers and local producers could dent Bralirwa's dominance. They forecast its market share to drop to 91.5 per cent in the near future.

On the other hand, Rwanda's commercial beer market remains small compared with most of its neighbours. Data compiled by Canadean and African Alliance indicates Rwanda's per capita beer consumption stands at 6.9 litres per year compared with Kenya's 14.1 litres per year and Burundi's 16.5 litres per year. However, it is higher than Uganda's 5.9 litres per year.

Nevertheless, there exist significant opportunities among local brew consumers who are expected to upgrade to commercial beer, with rising economic growth.

However, proposed changes to Rwanda's tax laws are likely to hinder Bralirwa's future expansion plans. A draft law that carries a provision compelling local firms to retain 20 per cent of their profits in a reserve fund for the payment of taxes but based on a ceiling of 10 per cent of net assets could constrain Bralirwa's ability to deploy capital for expansion.

In addition, the proposed law is seen as an impediment for investors eying capital-intensive sectors like telecommunications and banking, which require massive reinvestment in the medium to long term phase of operation.

Bralirwa rolled out Rwanda's first local beer brand, Primus in 1959, which was followed by other brands after 1987. In 1971, Heineken Group acquired a 70 per cent stake in the company which it increased by five per cent this year.


15 December, 2010