Appetite for Rwandan share offers seen sustained

* Attractive pricing pulling investors in

* Investors also betting on stability and growth

* Foreign exchange seen as main risk

By Graham Holliday

KIGALI, Sept 2 (Reuters) - Investors are expected to keep supporting initial public offerings of Rwandan firms by the government due to cheap valuations, economic fundamentals and political stability.

The landlocked central African nation of 11 million people has been gripped by IPO fever this year, with offerings from brewer Bralirwa and Bank of Kigali , the country's biggest by assets, drawing subscribers for almost three times the shares on offer.

The government plans to sell a 20 percent stake in the country's biggest insurer Sonarwa (Societe Nouvelle d'Assurance du Rwanda), in which Nigerian firm IGI owns a 35 percent stake.

It will also sell a stake in telecom operator MTN Rwanda, a unit of South Africa's MTN Group , as well as shares in an unidentified cement firm.

"Being a government exit, the government is able to offer a discount which will attract (investors)," said Nkoregamba Mwebesa, managing director of CFC Stanbic Financial Services in Kenya.

"We should continue to see appetite for all that. Rwanda is also stable politically, and that encourages investors as well."

The Bank of Kigali offering, shares were offered at 125 Rwandan francs a share, translating into a multiple of 1.4 times book value, a 15 percent discount to its Kenyan peers at the time of the sale.

"When the government is exiting they don't care about dilution. They are not out to really make money," said Mwebesa.

The government's main aim, market players said, was to help kick-start the nascent bourse.

The World Bank's 2011 Doing Business report ranked the country as the leading business reformer in the five-nation East African Community bloc.

"Although Rwanda offers limited public investment options, it does present investors with an opportunity to get into an attractive market with strong growth prospects," said Sean Nowak of Africa-based private equity firm Kaizen Venture Partners, which bought three companies in the Rwandan coffee sector this year.

The coffee and tea producing country's economy expanded by 9.4 percent in the second quarter, the fastest quarterly growth rate since the first three months of 2009, while inflation has remained subdued compared with the rest of the region.

GRAND PLANS

Officials at the eight-month old Kigali bourse have grand plans for the development of the market to attract more stock and debt issues.

"We are hoping to put in place an electronic trading platform by June next year," said Robert Mathu, chief executive of Rwanda Stock Exchange.

Bank of Kigali, whose shares soared 52 percent to 190 francs after listing on Thursday, joins Bralirwa, which is controlled by Heineken , and two cross-listings from Kenya by Nation Media and Kenya Commercial Bank on the fledgling bourse.

The biggest risk facing investors who move into Rwandan shares is foreign exchange, Mwebesa said.

"You need to factor that into the investment decision," he said, adding volatility in the franc or in regional currencies like the Kenyan shilling could expose investors.

Nowak said that for businesses not controlled by well-known companies such as Heineken in Bralirwa, management issues could also pose a risk.

"One of the challenges that private equity investors face is a lack of management capacity in target companies," Nowak said. (Additional reporting and writing by Duncan Miriri in Nairobi; Editing by Will Waterman)