Alpha & Omega Part II: Dearth of corporate leadership skills?

 Bullish Thoughts is worried…Yes, really worried. Only last week he was pontificating about how “excited” he was to have come across  an Alpha & Omega Dairies product in Chivhu in a country where Harare is closer to Mazowe.

Then he observed that when the Alpha & Omega General Manager, a Mr Nhari, when given the ideal opportunity to pontificate about how Alpha & Omega is going to transform the FMCG sector, he starts with a bucket-load of political insinuations.

To put it into perspective, this is a guy who has the abnormal advantage because his bosses/ shareholders “can” get free press coverage without even asking for it.

He gets his maiden interview with the press…at least as far as Bullish Thoughts is concerned. The guy opens his mouth and starts blurting stuff like “…contrary to public opinion, Alpha & Omega is professionally run…it is run by a competent board…it will perform despite the political affiliations of its shareholders…blah blah blah…”

Firstly Bullish Thoughts has never seen any negative press about Alpha & Omega besides the pun that Nestle Zimbabwe was the Project Manager.

Bullish Thoughts, who has a serious weakness for Dairy Products (cows’ that is…not that being interested in our other halves’ is a bad idea), was lauding Gushungo Holdings for value addition and coming up with a product quite at par with the market and now an executive forgets that he is not the shareholder.

Bullish Thoughts says to Mr Nhari (or hopes someone will tell him) that Alpha & Omega has the abnormal marketing advantage and he has to exploit it and get as much shelf space as possible in leading outlets like OK Zimbabwe, TM Supermarkets, SPAR & Pick n Pay.

Most people would be willing to try out the Alpha & Omega brand because they are guaranteed there is no use of GMOs as the cows are from Gushungo Farm.

Everyone knows who the owners of Alpha & Omega are and we all expect the plant to be kitted with the most economic and efficient equipment because it’s a modern establishment.

Seriously, what was Mr Nhari insinuating about ZANU PF and the quality of milk products at Alpha & Omega?

Bullish Thoughts can only say to all business leaders and managers (like Mr Nhari…) that people go into business to make money. No shareholders want a useless excuse…That’s why you were hired in the first place, too chart a new path and leave a trail.

Telecel…You gotta love the cheekiness

Bullish Thoughts has always loved Telecel even when it was blue. Their adverts are always top notch and with serious creativity. They should really have a really good Ad Agency.

However, it is what Telecel put together after the “once was” useful Net*One decided to dishonor its interconnection debts. While the Inspired Network  was fighting with NetOne, Telecel decided to put an advert: “Come to the network that connects you across all networks. So go ahead and tell someone”. Ain’t that just interesting.

Bullish Thoughts did write last year about competitors exploiting your public weakness. You all should remember the “No New Sim Card, No Bank Account & Connect to All Networks” by-line when Econet launched EcoCash last year while NetOne was asking subscribers to get a new sim card to get the same service.

On another note, does anyone know anyone who uses NetOne besides civil servants?

Bullish Thoughts was also quite intrigued by NetOne executive who took a populist decision and left everyone on post paid billing while Econet Wireless migrated everyone to prepaid. Now that they are paying for it, they are complaining that Econet Wireless made the business move.

Also did anyone notice that NetOne was not disputing it owed money to Econet Wireless but quantum. Out of interest, why does NetOne not pay that which it thinks it is owing Econet Wireless and then negotiate on the difference.

The minorities need confidence in the regulator & markets…

Securities Commission has been talking a lot about monitoring the markets especialy listed companies. Bullish Thoughts would be glad if SEC can evaluate if Turnall is being charged fair interest rates by the parent company.

Its finance bill for 1HY2012 was ridiculous and quite prejudicial to minorities in the construction company. Confirmation that any lending-borrowings are arms’ length and they the company is allowed to borrow elsewhere given the relatedness of the parties is crucial for investor confidence.

Capital Bank…New baby on the block?

Bullish Thoughts is disappointed that Capital Bank (formerly ReNaissance Merchant Bank) chose to parade its website during the launch (www.capitalbankcorporation.co.zw) on 24 August 2012 knowing fully it was not functional (if it existed at all).

Online presence is the modern way of getting information and in real-time too. By Sunday, Capital Bank was not existent even on Google. Bullish Thoughts hopes this will be rectified soon.

That aside, Bullish Thoughts was quite inspired by the talk given by Capital Bank Chairman, Dr Joseph Kanyekanye. It was quite refreshing and one can only hope that Capital Bank emulates other great African banking comeback stories. The classic one is that of Equity Bank of Kenya. In 1994, few gave a dime for Equity Bank’s chances. It had $262k deposits, $107k loans, 27 employees, $393k losses against capital of $35k so the bank was technically insolvent to the tune of $357k. Today Equity Bank has a turnover of $2.3bn and nearly 7,000 employees.

Bullish Thoughts or Diamonds & Dogs and some Alpha & Omega dairies….

Diamonds & Dogs…

Are you a ZSE investor? If so then you’re probably aware of Willdale the $533,000 market cap company. You are probably aware of Cairns, the $812,000 market cap company. The former was the week’s diamond at 50% return (-75% YTD) while the latter was the dog at -37.50% for the week (-0.50% YTD).

Willdale is in the bricks business. Bulls n Bears has no idea (as of now) how it is fairing against the like of Beta bricks  and many other informal brickmakers… The financials are not so rosy though.

The same goes for Cairns. Bulls n Bears bets it’s a matter of time before its shut down, liquidated or placed under Tudor House. When was the last time you saw Willards Chips, Chompkins, Cashel Valley, Instant Coffee Charhons “Dog” Biscuits?

Enough about struggling construction & manufacturing entities!

Alpha & Omega…not for baby feeding

Bulls n Bears had been aware that the First Family decided to add value to milk instead of selling it to Nestle for a song raw. It’s actually a brilliant idea…just look at Kefaloes distributed by Cheese Man, it’s now commanding significant shelf space in OK, TM & Spar.

Bulls n Bears had never seen the Alpha & Omega products in Harare though despite word having gone out that the product was now on the market.

It took the Heroes Holiday to find it…in Chivhu Spar of all places. Bulls n Bears being the curious type did buy it. He selected the Strawberry flavor Yoghurt with the trademark “Musape Vana”. Gotta admit, it was really good and compared quite favourably with Kefaloes & DendDairy  yorghuts.

While the first family may not represent your traditional textbook entrepreneur (we expect the President & his family to have it easy even with sanctions), the concept of value addition was magical. It will be interesting to see the financials after say 18 months.

Bulls n Bears challenges all merchants of raw agricultural products, if they could just add value to them. How about a vegetable processing plant for all the farmers from Mutoko? Just ask yourself everytime you are about to but green peas from Koos or Robertsons etc or those frozen vegies, if there is not opportunity to process the same products that are just rotting away in Mbare.

 

La Serenata: Poor service or Bulls n Bears is out of sync with the style…

Bulls n Bears doesn’t compromise when it comes to quality and customer service delivery. He has had awful experiences at Standard Chartered, his primary banker which he can’t leave because it has a working Visa Gold Card (great product that one), Pizza Slice, Pizza Inn, Endaweni (that traditional food restaurant  close to Dzidzo House amongst many disappointing places.

He was not prepared however for the service he got at La Serenata Restaurant(formerly Seasons of the Sun). Bulls n Bears had lunch there last Wednesday. He placed his first order (Starter) at 1245hrs which got delivered 30 minutes later (butternut soup for crying out loud), the main meal came 1 hour later. Bulls n Bears decided against having a dessert…they probably would have sent someone to Alpha & Omega in Mazowe for the choc sauce ice cream.

Don’t get Bulls n Bears wrong… La Serenata has amazing landscape. It’s just that Bulls n Bears is not used to 2.5 hour lunches which could just take 45 minutes. Time is money. The food was OK but waitering pathetic. Bulls n Bears is not going back there to waste another hour.

 

Google the cash…

Did you know that Google Incorporated had $43bn in cash at the end of June and generates $22.5m in revenue roughly every 4 hours. 

Did you know that...

Purchases and payments to individuals made with mobile phones will reach $670 billion globally by 2015, up from $244 billion in 2011, according to consulting firm Juniper Research Ltd. That’s still just 6 percent of the $11.2 trillion spent via credit and debit cards in 2011. Bulls n Bears thinks EcoCash will be the game changer for Econet Wireless going forward.

Golden Dust…

Bulls n Bears hopes you did not buy Falgold at 35c…otherwise you probably need to go see your psychiatrist…Perhaps you also bought African Sun at 20c, Interfin at 30c,  Meikles at 55c, etc. If that’s the case, perhaps it’s high time you went to AfrAsia Money Market Fund…the stock market is just not for you.

Invest Wisely!

Dumbu nemusana mundege yeAir Zim plus ZRP & abuse of domestic tourist

Bullish Thoughts had taken a break but he is back. He is quite intrigued by the developments that have been taking place in the local capital markets.

Matonjeni up in the skies…

Bullish Thoughts was in Victoria Falls for the annual ZAPF Congress. It was quite a interesting journey. Firstly, Matonjeni was up in the sky as opposed to last year when Zambezi Airlines was the transporter.

However, the site of Matonjeni's cockpit screens was sickening to the core. Summarily put, the cockpit screen looked like that of a "dhobha dhobha", you know those run down lorries that ferry pit sand, river sand, bricks where the only roadworth part is the windscreen!

The worst was still to come on Friday flight to the “smoke that thunders”!

Air Zimbabwe decided to overbook the trip from Harare. The result was the kind of stuff you see on Nickelodeon!

Passengers had to seat on each other lap so that everybody could be accommodated on the flight.

Imagine “kugara paKadoma” in an aeroplane!

IATA should just cancel the safety certificate because having five passengers in a space designed to accommodate 3 passengers is unheard of! Dumbu nemusana mundege here akomana!

ZRP and the abuse of the domestic tourist

After leaving the Victoria Falls International Airport, the shuttle bus arrived at the police roadblock just before the bridge outside the Victoria Falls town.

The convoy of 5 or so buses taking delegates from the airport to town was stopped “because the drivers were not displaying their driving licences on the windscreen”. Quite weird ain't it.

The buses waited for over an hour whilst the police were arguing with drivers. Bullish Thoughts is reliably informed that if the buses were carrying foreign tourists, it would not have been stopped for such a long time, almost equivalent to the time Matonjeni took from Harare to Victoria. Eik!

Someone needs to educate the police on professional contact and adapting to the situation on the ground because domestic tourists are always a huge chunk of arrivals to all destinations.

The Curse of Century Towers

Bullish Thoughts thinks Century Towers is probably cursed. No offense meant but that's the building where 15 employees died when the elevator crashed. That's the same building which housed Century Bank. Ever since, any institution that comes into contact with Century Bank routes has gone under.

Bullish Thoughts will not belabor  the Interfin debate suffice to say he closed his account way back in February after having been given $500 on the corporate account. He decided to bank with banks from thereon.

Unfortunately the struggle for survival is not confined to Interfin Bank alone. Other parts of the "kaconglomerate" are also disintegrating. ZSE eventually chopped Gulliver off the bourse for failure to release the results but not before employees had already started picketing for their salaries.

We can only say "chimwe chikomba tasa"

One other obvious thing coming out is that ultimately there is no such as the corporate veil because money is involved, it gets very personal!

Government the cotton buyer

Bullish Thoughts is beginning to think that government mandarins now need psychiatric attention. How one can think that the broke government can suddenly have the money to buy cotton off farmers when it still hasn't paid for cereal deliveries done to GMB in the past two years boggles the mind.

Cotton price as at 21 June was US$0.65 on the international market. The farmers are demanding a minimum price of US$0.80 for the lowest grade of cotton while cotton merchants want to pay US$0.30, a development that had resulted in delays in opening the marketing season which usually starts in April.

Elsewhere in the world, governments pay farmers a subsidy being the difference between the purchase price offered by merchants and what the farmers wanted. Merchants will get the international price.

Forgive the cotton farmers! They don't give a hoot about world markets. Unfortunately because the agritex officers are just talk how to inform farmers about killings weeds, rotating crops but no financial training they never advised farmers to manage their costs of producing the crop.

.

Hail Masvinu; King of Ugliness

Pretty ugly, ain't it? Its quite interesting to note that the Mr Ugly contest has been going on for a number of of years but they had never encountered a man so ugly that traffic lights would immediately change to red straight from green!

The man badly however needs to make money from his new found firm and his dzetse like face.

Bullish Thoughts is kindly appealing to Corporate Finance/ Investment Advisors to structure a portfolio indexed to ugly subject to the constraint that Masvinu will not use facial creams or otherwise.

Bullish Thoughts thinks that Masvinu could approach the manufacturers of Chikwapuro, Chirindamatura or Raid Insect killers and he could just wink at the cockroaches and they will drop dead straight away. The Zora Butter route might way as strikers may fail to score after seeing the King i the terracces.

Otherwise, Hail Masvinu; Oh King of Ugliness! 

Diamonds & Dogs: We want 51% shareholding in all pregnant women!

Diamonds & Dogs: We want 51% shareholding in all pregnant women!

Diamonds n Dogs is worried that the country will soon indigenize all poverty, indigenize all ZESA blackouts, indigenize all burst sewer pipes, indigenize all potholes and even pregnancies.

Diamond: Zimplow

The diamond status has nothing to do with the share’s performance the past week. It is really to do with the acquisition of a significant stake in TPH.

This idea of being the largest maker of communal farming equipment doesn’t appeal to Diamonds & Dogs. You see, Diamonds & Dogs grew up in rural Chivhu at Huchu Village and was there till after A Level.

He knows pretty well that the ox drawn plough that the family owned was bought before he was born and Diamonds & Dogs had to replace it in 2009 when he was 29 years old! That equipment has a long cycle except chivhiri & muromo wegejo that are replaced every season…supposed to at least!

The volumes are not really there and after RBZ Agriculture mechanization programme of the quasi fiscal days, the future was bleak for Zimplow.

Diamonds & Dogs can only say the TPH opportunity came at the right time for Zimplow. Mining sector is fairly doing well under the circumstances, only if government would insist Chinese miners procure equipment locally.

Construction will pick up some day and at least there is hope now for Zimplow.

A colleague of Diamonds & Dogs was however worried for his compatriot Charles Nyambuya, MD of TPH. Is he going to stay on? Ordinarily, acquisitions seek to derive maximum cost savings and sweat all the potential synergy benefits. Zondi Kumwenda is so loved by this “gullible” market (not that he has done anything wrong, the hype seems just overrated) and no doubt many investors would want him to stay own.

But then will he be able to lose the ox drawn plough mentality to the side tipping heavy mining trucks with a wheel that Zondi’s 20 oxens put together can’t pull?

It will also be interesting to see how the businesses will be integrated going forward.

One thing that comes out of this TPH/Zimplow transaction is that good companies are always easy to dispose because potential investors can see the value in them.

Most likely Astra will be the next to go.

Diamonds & Dogs however feels sorry for the financial advisor who got the Cairns Disposal Mandate. He is not sure of Homelink though he is quite convinced that if he were in UK, he would use Western Union and nothing else.

Maybe there are some good assets in Homelink like those houses in Mainway Meadows that no one really knows what’s going on there.

Dog: Indigenisation

Diamonds & Dogs doesn’t hate indigenization at all. The war of liberation was all about political and economic independence.

If he had a cash pile, he would be the 51% local partner in all the well run companies. Everywhere a multinational entity goes, it is literally standard practice to have a local investor as a partner.

However, Diamonds & Dogs thinks that this law should be applicable in industries where the local shareholding should have high impact on the economy and society…like the mining sector typically.

In fact, indigenization and empowerment of local investors is the new world economic order. Look at what’s happening in South America. Initially everyone thought it was only the “crazy” Hugo Chavez but Argentina did it too with the nationalization of the Spanish oil company YPF.

Governments worldwide are now demanding a bigger share in their natural resources to stop the plundering that have been going on for decades.

Whether this is done through 50% mining taxes or stratospheric mining fees and royalties doesn’t matter.

Where there is a problem is when sectors that are not for profit also get localized.

Really, what’s the benefit of localizing a school? Everyone has cast in their memories the mess that Zimsec created when the country exited Cambridge run exams. Even up to now there is concern that Zimsec is still letting the country’s education down.

Education is supposed to be a differentiator of the high, average and low performers. These days 20 points at A Level is so common.

Now we want to localize ownership of the same schools. Diamonds & Dogs though the education sector is one of the few that that locals have been doing well in terms of easy set up and some have already established good reputation in terms of pass rates e.g., Maranatha, Tynwald.

Is it really an issue of wanting local empowerment or someone’s kid failed to get a place at one of the the prestigious schools?

If you look at the ownership of some of the high profile schools they are actually run by churches e.g., Peterhouse (both boys and girls), St Georges, Hartman & St Michaels, Dominican Convent, St Johns (green blazer), St Ignatius, Andersen, etc.

Diamonds & Dogs says let’s wait and see. At this rate we are going to demand 51% shareholding in pregnancies, poverty, burst sewer and water pipes, 51% shareholding in the load shedding etc.

There seems to be an obsession with ownership of everything despite the glaring short comings of what we already own…Banks locally owned are going down, companies are getting liquidated etc.

Why not achieve the same objectives through avenues like taxes, community development and so on.

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor  Diamonds & Dogs nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

Diamonds & Dogs: Got any idea why Dawn own(ed) a red light district hotel? Sex Tourism maybe…

Diamonds & Dogs: Got any idea why Dawn own(ed) a red light district hotel? Sex Tourism maybe…

Diamonds & Dogs has nothing against Ian Saunders and his team at Falcon Gold (Falgold) now owned by New Dawn Mining.

He just has this feeling that someone is managing the share price. There have been literally no trades and the price continues to be bid up.

Kind of looks weird, doesn’t it? Shouldn’t SEC and ZSE be investigating share price movements of more than 20% per day? Not only Falgold but every other stock! Investors have to feel safe and have to have confidence in the capital markets.

The regulators have to enforce that confidence through ensuring the market players play fairly.

No one wants to be the Greater Fool!

Diamonds & Dogs did comment two weeks back about the Falgold numbers that suddenly came right. He will however not go into further details about the fundamentals as he has no idea (as of now) about the associated extraction costs, ore grades, certified ore reserves (if any), capex and opex gaps

Now, with these tidly widly trades less than $2,500, the gains may  not mean much to any investor.

Diamonds & Dogs will wait and see if this is a bubble (he thinks it is), given that the company still has no concrete provider of the US$10m that required for further optimisation of operations.

Diamond: Falgold (US25c, WTD: +61.29%, YTD:  +316.67%, Mkt Cap $27,791,283)

Falgold’s Weekly Trading Statistics

	Attribute	09-July	10-July	11-July	12-July	13-July
Falgold’s	Price	Bid 17.50c	Bid 20c	22c	25c	Bid 25c
	Volume	-	-	8,881	1,141	-
	Value	-	-	$1,953.82	$285.25	-

Dog: Dawn Properties (US0.60c, WTD: -25%, YTD:  -0.14%, Market Cap $14,743,033)

Dawn is probably not any investor’s favourite play right now. Tourism sector not doing well, acrimonious landlord/tenant relations not doing well either and to make it worse, the tenant is now buying shares in the landlord’s company.

One would also be wondering  what on earth Dawn management was thinking when it bought Bronte Hotel in the first place…perhaps looking for a place to do sports after working…after all the hotel is at the nucleus of the red light district! Or may be promoting sex tourism…

Still on Dawn, how is it that Dawn’s Chairman got the contract to build a hotel for NSSA to be managed by RTG, a competitor of Dawn’s tenant? Isn’t that a conflict of interest?

And how about the same contractor misrepresenting to the SPB that it had the money for the NSSA project only to come back asking for money to carry out the same.

And what’s it with failed (or failing) businessman accusing others of poor management. Talk of the kettle calling the pot black!

Dawn Weekly Trading Statistics

	Attribute	09-July	10-July	11-July	12-July	13-July
Dawn	Price	0.75c	0.70c	0.70c	0.60c/0.80c	0.60c
	Volume	203,137	60,884	114,886	-	380,034
	Value	$1,523.53	$426.19	$804.20	-	$2,280.20

The Weekly Bulls n Bears

Bulls	Bears

ZSE Round Up

Market Performance:

§  Total market capitalisation dropped 0.31% to close the week at $3.67bn. YTD -7.59%.

§  The Industrial Index closed the week 1.68% lower at 131.55. The Mining Index closed the week 17.29% higher at 90.90.

§  Amongst heavyweights, Econet registered a loss for the week of 2.33%, while Delta and Innscor were overall unchanged.

§  Falgold, RioZim and ZHL were the top gainers of the week, up 61.29%, 25% and 13.64% respectively.

§  Lifestyle, Nicoz and Dawn recorded the most significant losses, down 52.62%, 25% and 25% respectively.

Flows for the week:

§  Volumes traded and turnover totalled 25.18mn shares and $6.47mn respectively.

§  Share volumes averaged 5mn shares per day.

§  Average daily value traded was $1.29mn for the week. Trades were dominated by Econet, Delta and Dairibord which made up 48.72%, 17.06% and 7.84% of turnover respectively.

Invest Wisely!

Notes

**The author of this report does not hold shares in any of the companies discussed/ mentioned in this report.

** Statistical information was sourced from ZSE, IH Securities & Bulls n Bears (www.bulls.co.zw)

Bulls n Bears

Email: bulls@bulls.co.zw

Website: www.bulls.co.zw

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