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The Value of Liquidity

The Value of Liquidity

The value of liquidity

Liquidity, as commonly defined, is the degree to which an asset or security can be quickly bought or sold in the market without affecting its price. For shares, there must thus be established market with enough buyers and sellers to transfer ownership of the shares quickly and easily for the market price. For most Namibians, this means the Namibian Stock Exchange. At the end of the year, the NSX releases its annual statistics on trades. Let’s see how liquid the market was for the local primary listed companies.

Namibia Asset Management (NAM is a fund management business listed on the exchange. During the last year, 411 550 of their shares traded on the exchange, with the total value of the trades at N$ 283 208. At year end, their share price had dropped to 64c per share, an 11.1% drop from the end of last year. They ended the year with a market capitalization of N$ 128 million, making them the second smallest company on the exchange.

Nictus Holdings Namibia (NHL) is engaged in retail motor vehicles, tyres, furniture and provides financial and insurance services in Namibia. During the last year, 908 293 of their shares traded on the exchange, with the total value of the trades at N$ 1 048 224. At year end, their share price had dropped to N$1.80 per share, an 4.8% drop from the end of last year. They ended the year with a market capitalization of N$ 96 million, making them the smallest company on the exchange.

Letshego Holdings Namibia (LHN) provides banking and other financial services in Namibia. During the last year, 890 042 of their shares traded on the exchange, with the total value of the trades at N$ 3 528 417. At year end, their share price had dropped to N$3.90 per share, an 2.3% drop from the end of last year. They ended the year with a market capitalization of N$ 1 950 million, making them the fourth largest company on the exchange.

Stimulus Investments (SILP) is a Namibia-based private equity investment company. During the last year, 46 118 of their shares traded on the exchange, with the total value of the trades at N$ 5 593 652. At year end, their share price had remained stable. They ended the year with a market capitalization of N$ 564 million, making them the fourth smallest company on the exchange.

Bidvest Namibia (BVN) has a diverse range of businesses, inter alia fishing, freight and logistics, services, trading and distribution. During the last year, 886 120 of their shares traded on the exchange, with the total value of the trades at N$ 6 814 543. At year end, their share price had dropped to N$6.99 per share, an 10.8% drop from the end of last year. They ended the year with a market capitalization of N$ 1 482 million, making them the sixth largest company on the exchange.

Nimbus Infrastructure (NUSP) is a ICT investment company, with its most notable investment being Paratus Namibia. During the last year, 1 060 152 of their shares traded on the exchange, with the total value of the trades at N$ 11 252 014. At year end, their share price had increased to N$11.00 per share, an 4.8% growth from the end of last year. They ended the year with a market capitalization of N$ 316 million, making them the third smallest company on the exchange.

Oryx Properties (ORY) specializes in owning and managing real estate assets. During the last year, 4 886 066 of their shares traded on the exchange, with the total value of the trades at N$ 99 335 769. At year end, their share price had dropped to N$20.21 per share, an 1.8% drop from the end of last year. They ended the year with a market capitalization of N$ 1 596 million, making them the fifth largest company on the exchange.

FNB Holdings (FNB) is a financial services company and a holding company of the FNB Namibia group of companies. During the last year, 3 316 257 of their shares traded on the exchange, with the total value of the trades at N$ 149 492 083. At year end, their share price had dropped to N$43.44 per share, an 6.8% drop from the end of last year. They ended the year with a market capitalization of N$ 11 624 million, making them the largest company on the exchange.

Capricorn Investment Group (CGP) is a financial services group, previously known as Bank Windhoek Holdings. During the last year, 13 424 398 of their shares traded on the exchange, with the total value of the trades at N$ 220 898 896. At year end, their share price had dropped to N$15.50 per share, an 13.9% drop from the end of last year. They ended the year with a market capitalization of N$ 8 047 million, making them the third largest company on the exchange.

Finally, Namibia Breweries (NBS) is a beverage manufacturing company. During the last year, 8 760 070 of their shares traded on the exchange, with the total value of the trades at N$ 387 866 700. At year end, their share price had increased to N$46.50 per share, an 19.2% gain from the end of last year. They ended the year with a market capitalization of N$ 9 604 million, making them the second largest company on the exchange.

Now let’s compare that to Trustco (TUC/TTO), the diversified financial services company that invests and operates sustainable high growth assets. During the last year, 19 100 of their shares traded on the Namibian exchange, with the total value of the trades at N$ 154 210. However, on the JSE, 82 637 306 of its shares traded, at a value of N$ 757 648 825. As a result, at year end, their share price had increased to N$15.76 per share, an 77.1% gain from the end of last year. They ended the year with a market capitalization of N$ 15 354 million, which would have made them the largest local company on the exchange.

Now it cannot be said that liquidity alone drives share performance, but it can certainly be argued that liquidity allows investors to unlock the value of a share with greater ease. In a more liquid market, Trustco had managed to trade 2.3 times more shares, and in value traded 85% of the value of the trades done by all local Namibian companies on the NSX combined. Perhaps there is something to be said for encouraging greater market liquidity after all…

Desmond P van Heerden, HonsBComm (Stell) is the Chief Analytics Officer of Trustco Group Holdings Ltd. Previous articles available online at http://toi.hopto.org/. He can be contacted at DesmondV@tgh.na

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