ZSE July trading update

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Zimbabwe’s economy has continued to shrink, leading to growing unemployment and significant underemployment, an international research body has said. A recent Business Monitor International (BMI) report said a weak labour market would continue to constrain consumption growth over 2017. BMI said they believed that income insecurity, together with low income levels, would gear consumption toward subsistence-based spending preventing significant consumption growth. Employers’ Confederation of Zimbabwe, at the start of the year, forecast that employers’ would not be hiring as much as they did in the past due to the depressed economy. – NewsDay, 1 August 2017

Getbucks Microfinance Bank Limited says uptake for the second series of its $30 million Medium Term Note Programme has been slow and is yet to meet regulatory threshold to bring the securities to listing. The Notes will now be placed privately by way of a tap issue with current subscribers  to issued with pricing supplements. This second series of the Programme will be listed by introduction on the ZSE after the threshold has been achieved. – The Herald, 1 August 2017

The Insurance and Pension Commission has raised a red flag over continued minimal participation by funeral assurance companies in funding the economy’s strategic projects. The funeral assurance industry’s current prescribed asset ratio is slightly above 1%, which is well below the required prescribed assets ratio of 7.5%. The Finance and Economic Development Ministry is concerned by this disparity, which is indicative of the slow traction at which funeral assurance companies have been supporting economic projects. IPEC commissioner Tendai Karonga told delegates attending the Funeral Assurance and Services Conference in Bulawayo that it is of great concern to both IPEC and the Ministry that the funeral assurance sector is non-compliant with the required minimum prescribed asset ratio of 7.5%. – The Herald, 1 August 2017

: Zimbabwe’s cotton output will be lower than expected this year due to a number of factors including excessive rains, which have made crop management and pest control a challenge. The country was expecting a yield of at least 100 000 tonnes of the commodity, but output could be between 70 000 and 75 000 tonnes, industry players have said. Above normal rains received during 2016/17 season made chemicals less effective, exposing the cotton crop to pests, particularly boll-worms. It has also emerged that some cotton farmers diverted large portions of inputs such as fertilisers to production of food crops such as maize given that the country was coming out of a drought season. The Cotton Company of Zimbabwe, through the Presidential Input Scheme, invested $42 million into production to support about 300 000 households during the last season. Cotton buyers from Mozambique also took advantage of prevailing cash shortages in the country by offering cash to growers in areas near the Zimbabwe and Mozambique border such as Mt Darwin, Mushumbi, Mukumbura and Checheche. This was worsened by the fact that some of the areas are not covered by mobile networks and this created a loophole as local firms were largely paying using mobile platforms. In the Lowveld, where cotton was planted late, the crop is now under threat from livestock such as cattle and goats because some villagers have stopped tending their animals. – The Herald, 1 August 2017

British tycoon Nicholas van Hoogstraten says his investment vehicle, Messina Investments, notified the Zimbabwe Stock Exchange of its intention to buy out CFI Holdings minorities despite claims by the regulator that due processes were not followed. As the battle for control at the agro-industrial group escalates, Van Hoogstraten yesterday said the regulator had been notified after rival Stalap Investments upped its shareholding in CFI. “Strictly speaking, Messina did not reach 35%. However, we combined shareholding in related companies that own stake in CFI. These companies are Willobheys Consolidated and ZimCor. Along with these companies, there are other minorities who pledged their support to me taking stake to above 35%. When this happened, authorities were notified,” he said in a telephone interview from his London base. – Daily News, 1 August 2017. Under normal circumstances it is the company that notifies the public and other shareholders than a certain shareholder has reached the 35% threshold and has made an offer to minority shareholders.

ZSE July trading update

  • The Zimbabwe Stock Exchange was up 3.72% in the month of July to 203.26. The market is now up 40.64% year-to-date and is trading at levels last seen in mid January 2014.
  • The mining index has however weakened a bit shedding 0.5% to 69.44, on the back of losses in nickel miner Bindura, down 18.33% to 2.45 cents.
  • Turnover for the period at approximately $24.7 million was 38% lower than more than $39 million that was invested into the markets in June 2017.
  • A total 33 stocks closed the month having recorded share price gains while 9 closed negative.
  • CFI emerged as the market’s top performing stock up 121.72% to 37.25 cents. The counter benefited from the shareholder squabbles that have seen the share price trade at a premium of 69.31% to the mandatory offer of 22 cents made by major shareholder Stalap Investments.
  • African Sun was the second top riser of the month with a 33.33% gain to 2 cents. Early in the month MD Edwin Shangwa told the AGM that the company’s revenue for the 5 months to May 2017 grew by 15%.  EBITDA margin improved to 4% from a negative 3% same period last year.
  • Meikles was the month’s biggest faller down 25.8% to 18.55 cents following the collapse of its takeover negotiations with Dubai based investment company Albwardy Investments. Investors had piled into the counter in anticipation of a better price from Albwardy.
  • Bindura was the second top faller down 18.33% to 2.45 cents with investors not impressed by its profit after tax of $609,961 for the year ended 31 March 2017 down from $649,070 prior year comparative.
  • Barclays was also among the fallers with the market awaiting regulatory information with regards its takeover by Malawi’s First Merchant Bank (FMB). FMB has already agreed the deal with Barclay’s PLc and is now waiting for approvals from the RBZ and other regulatory authorities.
  • Heavyweights such as Delta, Innscor, BAT and Seedco were hardly changed during the month with the exception of Econet which picked up 13.05% to 40 cents.
  • Going forward we expect movers and shakers to be among the mid and small tier stocks while big cap counters will get marginal movements.
  • Smart money is however expected to be invested in the big cap counters which are seen as more of defensive stocks. The top 5 counters all seem to have the staying power with strong management and brands.
  • Seedco which lost 0.71% to 139 cents might however experience bigger movements as more details of the proposed partial unbundling are availed.
  • Innscor is also trading under a cautionary with regards buying out minority shareholders in Colcom. This will also affect the company’s share price.
  • The coming month will also see some companies coming out with their half year results but we believe company fundamentals will continue to play second fiddle to macro fundamentals that have characterized the market year-to-date.
  • Currency concerns will continue to send smart money towards the equities market although some funds could continue to be channeled towards property development with residential stands the major attraction.

 

Indices Level Month’s performance
Industrials Index 203.26 3.72%
Mining Index 69.44 -0.50%
Turnover $24,730,449 -38%
ZSE’s Top risers Price (cents) Month’s Gain
CFI 37.25 121.72%
Afsun 2 33.33%
Dawn 1.82 30%
Proplastics 5.99 30%
Axia 12.5 28.87%
ZSE’s Top fallers Price (cents) Month’s Loss
MEIKLES 18.55 -25.80%
BIND 2.45 -18.33%
BARC 3.61 -11.51%
ARIS 0.90 -10.00%
UNIFREIGHT 1.11 -7.50%
Top Five by Market Cap Price (cents) Month’s Performance
Delta 127.27 0.19%
Econet 40 13.05%
Innscor 72.75 1.02%
BAT 1805 0.27%
SeedCo 139 -0.71%
By |August 1st, 2017|Categories: Headlines|

About the Author:

Kudzanai Sharara
Kudzanai’s background in financial journalism with ZFN, combined with a continuing education in financial management, provide a solid grounding for his work in the research department.