Standard Bank forecasts growth in Mpico business

Standard Bank says the recent recapitalisation of Mpico Limited through the local shares market will significantly sway views in favour of Malawi’s struggling equity market and help spur jobs growth in the real estate sector.

The Malawi Stock Exchange (MSE)-listed bank acted as the sole financial adviser and originator in the transaction, which raised K9 billion, making it the largest rights issue in recent financial history in Malawi.

The bank’s head of investment banking Shakil Satar said in an interview last week that the recent equity restructure deal highlights the potential that the property management firm and the Malawian real estate and property development business offers.

“The fact that Mpico was able to achieve a final uptake of 82 percent of the rights issue and that Mpico’s current share price is above the rights offer price indicates a positive reading of the deal and endorsement of the growth story of Mpico,” he said.

Satar said the long-term impact of the deal will be the building of new properties, the upgrading of existing properties as well as job creation, which will inevitably result in broader positive impact for the Malawi economy.

He said in terms of financing, success of the deal is an indicator in the market that funding requirements do not always need to be met with a debt solution.

“There lies alternatives to capital-raising. The Mpico transaction has led to a shift in views around capital raising, opening up an opportunity for the bank to work with a broad range of Malawian companies to restructure their balance sheets through equity funding, especially in a prevailing high interest rates environment,” said Satar.

The rights issue raised K9 billion from sale of more than 1.1 billion shares to the shareholders of the property company, or 82 percent subscription, while financial risk managers snapped the remaining 18 percent.

Speaking earlier, MSE chief executive officer John Kamanga said performance of Mpico rights issue is an indication that the stock market has the capacity to meet the demand of those in need of capital.

“This demonstrates that one can raise capital at relatively comparative prices because we have seen that there has been a demonstration that the cost of raising capital has been quite minimal compared to the short-term,” he said.

Mpico—a publicly listed Malawian property development company—has in recent years found itself in financial binds and burdened by debt due to over-reliance on a single revenue stream, the government, which has been its main tenant.

With Capital Hill trying to rein in expenditure amid a budget aid freeze, Mpico Limited has been seeing red as government defaulted on its regular rental payments, resulting in the firm facing difficulties to service its interest payments on debt.

Mpico, with 2.2 billion shares on issue, traded at K8.24 per share on Friday on MSE.n