Bank of Kigali shares are underpriced at the current market price of about Rwf296 a share, according to a new report by Baraka Capital, a local brokerage firm, and Hartland-Peel Africa Equity Research.

This revelation comes on the heels of the bank’s financials, indicating an after tax profit of Rwf18.3 billion for the year ended December 31, 2014.

This was a 24 per cent increase from Rwf14.8 billion the previous year.

The lender has already announced a dividend payout of Rwf16.33 a share for the year ended December 2014.

"You would expect the firm’s share price to have gone up significantly. In another jurisdiction, the price would have been at around Rwf330 because of the bank’s continued to rise over the years,” noted Davis Gathaara, the Baraka Capital managing director.

The report, which the brokerage firm usually prepares when one of the listed companies announces its periodic performances, indicated that the bank’s shares should be at Rwf400 each, 35 per cent higher compared to the current price.

When the bank listed in 2011, it’s counter opened at Rwf125; it was trading at Rwf 300 at the end of December 2014.

Gathaara noted that the bank’s price-to-book ratio is low at 1.8 times, making Bank of Kigali shares a good buy for any investor. The price-to-book ratio is a ratio that is used to compare the market value of given stock to its book-value.

He added that the bank’s price-to-earnings ratio is also low, which makes the counter attractive.

"This means that it takes a shorter time for investors to recover their investment. In Kenya, where share prices of banks, like Equity went up after they announced their 2014 financial results, their price-to-earnings ratios are high. That’s why we feel Bank of Kigali shares are undervalued,” he explained.

He based the argument on the fact that the bank’s performance has been improving since it listed on the bourse, a situation that should attract investors and push up its share price. 

Bank of Kigali is Rwanda’s biggest bank and one of the three Rwandan-owned banks which collectively command 55 per cent of Rwanda’s banking assets.

Its has 34 per cent of the sector’s total banking assets, 31 per cent of loans and 31 per cent of deposits.

Nathalie Mpaka, Bank of Kigali’s chief financial officer, echoed the report, noting that probably investors had other avenues to invest their money.

"Otherwise, the bank’s shares should be in demand ahead of the June dividend payout, thus leading to a share price increase.”

"Looking at the fundamentals of the bank, we did well last year with high growth in profit so one would expect the stock prices to rise at the market but it is not yet happening,” she said.

Meanwhile, Banque Populaire du Rwanda, which is not listed on the bourse, is the second largest bank in Rwanda.

Though the bank has in recent years incurred losses and has been under-going restructuring. The other banks, most of which are foreign-owned, control 45 per cent of the sector’s assets, according to the report.

The report showed that the competition brought about by the entry of foreign banks is a threat to Bank of Kigali’s profitability.

It however notes that Rwanda’s fast economic growth and the potential market presented by the 77 per cent of the population that remains unbanked were opportunities for it to grow further.

Bank of Kigali is one of only two domestic-listed companies at the Rwanda Stock Exchange. The other is beverages manufacturer, Bralirwa.

Nairobi Stock Exchange-listed Nation Media Group, KCB, Equity Bank and and Uchumi Supermarkets are cross-listed on the RSE.

Celestin Rwabukumba, the bourse’s chief executive officer, has in recent weeks indicated that two more firms are set to list at the exchange this year, a move that will increase number of products on the bourse.