Good morning!
My apologies for dropping this a bit later than usual. There was a power cut as early 5 am that lasted long time, but anyways, let’s get into it!
We're looking at a company I started observing earlier this week, but had an interest in it since last week, not to invest in it but to know why it keeps being a laggered in the stock market. So let’s look at it;
The contemporary financial trajectory of Letshego Africa Holdings Limited (Letshego) represents one of the most complex narratives within the sub-Saharan African financial services sector. Founded in 1998 and headquartered in Gaborone, Botswana, the group has expanded its footprint across 11 African markets, transitioning from a simple micro-lending entity into a multi-faceted retail financial services provider. However, as of February 2026, the organization finds itself at a critical juncture characterized by a stark divergence between its suppressed equity valuation and a robust, digitally-driven operational recovery. The share price on the Botswana Stock Exchange (BSE) has experienced a protracted decline, currently languishing at BWP 0.85 per share, which reflects a year-to-date loss of 5.56% and a 52-week decline of approximately 26.1%. This persistent depreciation occurs despite the group reporting a staggering 919% increase in profit after tax for the first half of 2025, reaching BWP 181 million. To understand the fundamental drivers behind this equity-performance gap, one must examine the confluence of historical valuation benchmarks, systemic macroeconomic headwinds, aggressive digital transformation expenditures, and recent strategic pivots aimed at rebalancing the group’s geographic exposure.
Historical Context and the Genesis of Equity Decline
The current market capitalization of Letshego, hovering around BWP 1.85 billion, marks a significant departure from its historical status as a premier growth stock on the BSE. In the early 2010s, Letshego was perceived as a high-growth vehicle with an exceptionally high Return on Average Assets (ROAA), often averaging 36%. During this era, specifically around March 2010, the stock traded at BWP 15.95, with target prices reaching as high as BWP 20.73. At that time, the group maintained a 5-year historic Price-to-Earnings (PE) ratio of 8.2x and a Price-to-Book (PB) ratio of 2.8x. The subsequent decade saw a gradual erosion of these multiples as the group shifted from a niche, high-margin micro-lender into a regulated, deposit-taking institution, which inherently brought tighter regulatory oversight, higher compliance costs, and capital requirements.
The decline in the share price accelerated during the post-COVID-19 era, as the group embarked on its ambitious "6-2-5" transformation strategy. While the strategy aimed at future-proofing the business, the immediate financial impact was characterized by heavy capital expenditure in digital infrastructure and a temporary spike in the cost-to-income ratio. Furthermore, market sentiment was dampened by a series of net losses in the 2023 and 2024 financial years. Although "Profit Before Tax" remained positive and improved by 91% in 2024 to BWP 232 million, "Profit After Tax" was negative (BWP -70 million) due to a prohibitively high effective tax rate and hyperinflationary adjustments in West Africa. Investors have historically punished this bottom-line volatility, regardless of the underlying operational growth in the "Deduction at Source" (DAS) and mobile lending portfolios.
Period | Share Price (BWP) | Market Cap (BWP) | BSE Ranking (Performance) |
March 2010 | 15.95 | 2.90 Billion | High Performer |
February 2024 | 1.05 | 2.29 Billion | Volatile |
February 2026 | 0.85 | 1.85 Billion | 37th (YTD) |
Table 1: Long-term Equity Valuation Comparison
Macroeconomic Vulnerabilities and Regional Economic Fragmentation
The geographic diversification that was once seen as Letshego's greatest strength has, in recent years, emerged as a source of systemic risk. Operating in 11 different jurisdictions means the group is exposed to a wide array of sovereign debt crises, currency devaluations, and inflationary spirals. The 2024–2025 period was particularly grueling for the group’s West African operations. In Nigeria, the unification of exchange rates and the removal of fuel subsidies led to a precipitous decline in the Naira, which depreciated by 40.9% against the US Dollar in 2024 alone. This triggered significant foreign currency translation losses on the group's consolidated balance sheet.
Simultaneously, Ghana was designated a hyperinflationary economy, necessitating the application of IAS 29 accounting standards. This resulted in a net monetary loss of BWP 50 million for the first half of 2024, as the subsidiary’s net monetary asset position lost purchasing power. Even in its home market of Botswana, the economic environment remained strained due to a contraction in the diamond sector, which traditionally supports the government’s ability to maintain a stable civil service payroll—the primary source of Letshego’s DAS repayments.
The Impact of Currency and Inflationary Dynamics
The interplay between currency depreciation and the group's "Net Interest Margin" (NIM) is a critical factor in its financial economy. While Letshego’s local currency lending in markets like Namibia and Mozambique showed resilience, the cost of servicing foreign-currency denominated debt became more expensive as local currencies weakened.
Country | Inflation Status (2024/25) | Currency Impact | Notable Operational Shift |
Nigeria | High (34.8%) | 40.9% Naira Depreciation | Increased production/op expenses |
Ghana | Hyperinflation | Cedi Volatility | 125% Short-term loan growth |
Namibia | Moderate | Stable (ZAR Peg) | First Social Bond Listing |
Botswana | Declining | Pula Stability | Gradual recovery in non-DAS loans |
Table 2: Regional Macroeconomic Pressures and Responses
The group’s response to these headwinds has been a tactical "Geographic Rebalancing," which involves refining its participation model in East and West Africa to protect shareholder value from further currency erosion. This shift is intended to focus capital on the "Core Southern African" markets—Botswana, Namibia, and Mozambique—which collectively contribute over 80% of the group’s total profits.
The Strategic Transformation: 6-2-5 and the LetsGo Digital Mall
Recognizing the limitations of its legacy model, Letshego launched its "6-2-5" roadmap in 2020. This strategy is segmented into three distinct execution phases: Plan 6 (Productivity), Plan 2 (Customer Focus), and Plan 5 (Scaling). The bedrock of this transformation is digitalization, with an intended investment of approximately $50 million over five years ($10 million annually). The primary objective is to achieve a Return on Equity (ROE) exceeding 20% by 2025/26 by automating processes and expanding the customer base beyond the traditional government sector.
The "LetsGo Digital Mall" serves as the group's primary vehicle for this transformation. By February 2026, the Mall had surpassed 3.5 million registered users, offering a comprehensive suite of financial and lifestyle products, including insurance, savings, and telehealth services. The integration of robotics and artificial intelligence has enabled "zero-touch processing" for a majority of applications, which is essential for improving the cost-to-income ratio.
Evolution of Operational Efficiency and the Cost-to-Income Ratio
The group’s investment in digitalization initially caused the "Cost-to-Income Ratio" (CIR) to increase as legacy systems were replaced and new talent was onboarded. In the first half of 2021, the CIR was 47%, but it rose during the intensive investment phase of 2022–2023. By the 2024 financial year, the ratio stood at 64%, reflecting the higher costs of maintaining dual systems during the migration to the Digital Mall. However, management expects this to decline as straight-through processing (STP) reaches its target of 70-80%.
Mathematically, the path to an improved CIR and ROE is defined by the relationship between operating income (I) and operating expenses (E). The organization’s goal is to ensure that:
ΔI>ΔE
where ΔI is driven by transactional volume on the Digital Mall and ΔE is curtailed through robotics-led automation. In H1 2025, this began to materialize, as operating income performance remained strong (up 27% year-on-year) while total operating expenses were managed more stringently, leading to the massive jump in net profit.
Financial Economy: Analysis of H1 2025 and FY 2024 Performance
The financial health of Letshego in 2026 presents a dichotomy of "strong top-line growth" and "pressured bottom-line margins". In the 2024 financial year, "Net Interest Income" rose by 32% to BWP 2.33 billion, driven by strong demand for DAS and mobile loans. However, the group’s "Loan Loss Ratio" increased to 5.4% (from 3.3% in 2023) as a result of legacy non-performing portfolios in the non-DAS and micro-small enterprise (MSE) segments.
The H1 2025 results marked a definitive turning point. The group achieved a profit after tax of BWP 181 million, a 919% increase from the BWP 17.8 million recorded in H1 2024. This was driven by:
Reduced Expected Credit Losses (ECL): Net impairments fell by 31% to BWP 230.1 million.
Effective Tax Rate (ETR) Optimization: The ETR improved from 90% in June 2024 to 55% in June 2025, although it remains a key area for further refinement.
Deposit Mobilization: Customer deposits grew by 53% year-on-year to BWP 2.7 billion, reducing the group’s reliance on more expensive wholesale funding.
Financial Metric | FY 2023 | FY 2024 | H1 2025 |
Operating Income (BWP) | 2.28 Billion | 2.87 Billion | 1.48 Billion |
Profit Before Tax (BWP) | 121 Million | 232 Million | 405 Million |
Profit After Tax (BWP) | (149 Million) | (70 Million) | 181 Million |
Loan Loss Ratio | 3.3% | 5.4% | 3.1% |
Return on Equity (ROE) | (3%) | (1%) | 7% (Annualized) |
Table 3: Key Financial Performance Metrics (2023–2025)
The improvement in the loan loss ratio to 3.1% in H1 2025 is particularly significant, as it indicates that the group’s tighter credit provisioning and write-off policies are working. The group transition to a "Time in Default" (TID) methodology for calculating "Loss Given Default" (LGD) has increased Stage 3 coverage to 78%, providing a robust buffer against future credit shocks.
Management and Leadership Transitions
The leadership of Letshego has undergone significant restructuring between 2022 and 2026, aimed at stabilizing the organization and accelerating the execution of its transformation strategy. Following the departure of Andrew Okai, Aupa Monyatsi took over as Group CEO but resigned in January 2025. This turnover initially raised concerns about strategic continuity; however, the board acted swiftly to appoint Brighton Banda as Interim CEO before confirming Reinette Estelle van der Merwe as the Group Chief Executive Officer.
Van der Merwe, alongside Group CFO Gwen Muteiwa, has prioritized "operational excellence" and "tax efficiency". The current management vision is centered on a "refreshed focus" that emphasizes defending the core DAS proposition while scaling short-term credit and deposit growth. The Board, led by Chairperson Christopher Mokgware, has also been revitalized with new appointments aimed at strengthening governance and risk oversight in line with King IV requirements.
Corporate Governance and ESG Entrenchment
A major effort by management to restore investor confidence involves the deep integration of Environmental, Social, and Governance (ESG) principles. The group has converted country-specific ESG policies into actionable strategies, overseen by a newly established "Group Sustainability Management Committee". This is not merely a compliance exercise but a strategic move to attract institutional capital that is increasingly focused on sustainable investment.
Letshego’s alignment with 11 UN Sustainable Development Goals is evidenced by its product mix, which includes affordable housing loans, educational funding, and credit for micro-entrepreneurs. In Namibia, the group listed its first "Social Bond" on the Namibian Stock Exchange in 2024, demonstrating its ability to access specialized capital markets through its commitment to social impact.
The "Potential Transaction" and Geographic Rebalancing
One of the most critical efforts to reverse the stock price decline is the ongoing "Potential Transaction" first announced in late 2024. This transaction involves a strategic review of the group’s participation model in its East and West African subsidiaries. By February 2026, the group had issued several cautionary updates, indicating that it is exploring options that could lead to material changes in its shareholdings in businesses operating in these regions.
The logic behind this move is two-fold. First, it aims to "unlock shareholder value" by potentially divesting from, or bringing in strategic partners for, underperforming or high-risk business streams. Second, it allows the group to "de-risk" its balance sheet from the extreme currency volatility and hyperinflationary environments of markets like Nigeria and Ghana. The successful execution of this transaction could lead to a significant "re-rating" of the stock, as the market would no longer need to apply a heavy "risk discount" to the group’s consolidated earnings.
The Way Forward: 2026–2030 Outlook
The path forward for Letshego is defined by a transition from "transformation" to "execution and scale". As the initial 6-2-5 strategy draws to a conclusion in 2025/26, the group is preparing for its "next chapter," which will likely be characterized by a more focused, deposit-led banking model.
Strategic Imperatives for Value Restoration
To bridge the gap between its intrinsic value and its market price, Letshego must achieve several key objectives over the next three to five years:
Finalization of the Regional Restructuring: Resolving the "Potential Transaction" is the most immediate catalyst for a stock price recovery. Whether through divestment or partnership, clarity on the East and West African portfolio will remove a major source of investor anxiety.
Stabilization of the Effective Tax Rate: Management must continue to optimize tax efficiencies across its various jurisdictions. The drop from 90% to 55% in H1 2025 is positive, but a rate closer to the statutory averages of 25-30% would drastically improve the bottom line and ROE.
Accelerating Retail Deposit Growth: While customer deposits have grown by 53%, the group still relies on wholesale funding and listed notes. Moving toward a retail-heavy deposit base will lower the cost of funds and enhance balance sheet resilience.
Digital Monetization: The 3.5 million registered users on the Digital Mall must be converted into high-frequency, multi-product users. Increasing "Non-Funded Income" (NFI) through insurance, payments, and lifestyle services will diversify the revenue mix away from purely interest-based income.
Return to Core Strength: The DAS Advantage
The "refreshed focus" strategy signals a return to the group’s "cornerstone"—the DAS portfolio. By leveraging employer partnerships and salary-deduction models, Letshego can maintain low default rates while using digital channels to lower the cost of acquisition. This "hybrid" model—combining the safety of DAS with the reach of mobile lending—is the group’s most viable path to achieving a sustainable 20% ROE.
Strategic Pillar | Focus for 2026–2030 | Intended Outcome |
Product | DAS, Short-term Mobile Loans, Savings | Low NPLs, High Transaction Volume |
Channels | LetsGo Digital Mall, USSD (140555#) | Omni-channel accessibility, Zero-touch |
Funding | Retail Deposits, Social Bonds | Lower Cost of Funds, Diversified Base |
Markets | Southern Africa (Botswana, Namibia, Moz) | Stable, Predictable Profitability |
Table 4: Forward-Looking Strategic Roadmap
Analytical Conclusion
The decline in Letshego’s stock price to BWP 0.85 by February 2026 is a reflection of historical bottom-line volatility, aggressive investment-phase spending, and severe macroeconomic pressures in peripheral markets. However, the 2024–2025 financial period has demonstrated a powerful operational recovery, evidenced by strong top-line growth and a return to massive profitability in H1 2025.
Management’s efforts—ranging from the "LetsGo Digital Mall" rollout to the "Potential Transaction" aimed at regional rebalancing—suggest a proactive and technically sophisticated approach to restoring shareholder value. The organization is no longer a simple micro-lender; it is a digital financial ecosystem with 3.5 million users and a rapidly growing deposit base.
For the professional investment community, the current valuation represents a "valuation-performance disconnect." While the market remains cautious due to legacy issues, the underlying business fundamentals—specifically in core markets like Namibia and Botswana—remain robust. If management can successfully conclude the restructuring of its East and West African operations and maintain the current trajectory of tax and cost efficiency, the "way forward" is likely a significant equity re-rating that aligns the share price with the group’s renewed profitability and digital scale. The conclusion of the 6-2-5 strategy in 2025 marks the end of the high-cost investment cycle and the beginning of a period focused on harvesting the returns from its digital infrastructure.
