Diamonds & Dogs: Cash is King

Diamond: Afre (US6.50c, WTD: +25%, YTD:  25.00%, Mkt Cap $14,113,054)

Diamonds & Dogs says Cash is King…not Customer but C$SH. Any Analyst worth his salt will attest to that. The first thing any investor looks at/for when they get hold of the annual report is the cash in the bank. Cash makes or breaks a business.

Quality of earnings is another key aspect with investors looking at how easily a company’s profits can be translated to cash…typically signaled through the amount of dividend payouts.

Only BAT has signaled that its earnings are near cash with a 79% payout ratio in 2012.

On another note, there are also a number of CEs who are loved by market and thus help the perception on their companies and ultimately share prices. Locally names like Joe Mtizwa formerly at Delta and now a significant shareholder in Starafrica and now running his management consulting company. Zondi Kumwenda now CE of combined Zimplow Holdings Ltd, Canada Malunga who will be back at rebranded Masimba Holdings are some of the market favourites.

Globally, highly rated CEOs include Tim Cook of Apple, successor of the late Steve Jobs. 

In fact Steve Jobs was so good that It comes as no surprise that Harvard Business Review judged him the the best-performing CEO over the past 17 years was Steve Jobs. Steve was so good that many months after his death, we still worship (Diamonds & Dogs included) Apple products especially iPhone, iPad and the Mac range.

From 1997 to 2011, Apple’s market value increased by $359 billion, and its shareholder return experienced average compound annual growth of 35%. That remarkable accomplishment is likely to go unbeaten for a long time.

Jeff Bezos of Amazon.com is also up there. Under his leadership, the company delivered industry-adjusted shareholder returns of 12,266% and saw its value increase by $111 billion.

The list is endless.

Back to Afre. The company recently undertook a successful $8.6m rights that was underwritten by cash rich NSSA. In an environment where liquidity crunch is the buzz word, the successful cash injection was an obvious boon for Afre Corp.

If financial markets are anything to go by…that is attest to investor confidence Afre Corp has been buyers only since December. Those who followed their rights can brag about a 22% capital gain.

Diamonds & Dogs is convinced that given the illiquid nature of the stock (NSSA holds more than 52% directly & indirectly), the only way is up.

Another dimension would be the corporate governance transformation. Besides Board Level changes there have also been notable changes at Afre Corp head office with seasoned insurer and Actuary (Actual if you may…) Douglas Hoto now at the helm and former Econet Wireless CFO Corporate Finance William Marere now FD among other executive changes.

It also seems that the old adage new brooms sweep clean may become true at the insurance holding company. If the turnaround witnessed at 1HY2012 where a balance was attained between shareholder and policyholder ching ching can be improved on with the FY2012 financials due in March 2013, then the only way for the share price is up.

Or maybe the market (read analysts and investors) is slowly coming to like the new Executive which notably has not been stingy with business information (unlike the predecessors). Availing sufficient info to analysts helps remove the perception that companies have something to hide and attest to the integrity and confidence of management.

Some of the flagship businesses for Afre Corp include First Mutual Medical Savings, Pearl Properties, First Mutual Life and FMRE Property & Casualty (Zimbabwe). Other companies in the group are TristarInsurance, FMRE Life & Health, FMRE Property & Casualty (Botswana) and African Actuarial Consultants.

As for now, all stockbrokers have buy orders on the counter while we all wait for the coming of FY2012 results!

Dog: MedTech (US0.03, WTD: -85%, YTD:  0.00%, Market Cap $346,900)

Diamonds & Dogs can only say the last time he checked, MedTech was now a retailer not only of drugs but exercise books.

Capitalised at $346,900 there is now doubt that the company’s car park is occupied by more valuable assets.

Taking the company private might not be a bad idea after all as the ZSE listing fees and Transfer Secretary fees may be more than the company’s profits.

Bullish Thoughts: Money in Zimbabwe Education Sector?

Bullish Thoughts is seriously thinking of investing in a primary and high school. Yes, he is considering going to Chegutu Lands Committee and getting a 20ha plot where he will farm tobacco and leave enough space to build the schools.

He is going to employ a few local dudes to mold farm bricks and then buy a few face bricks from Willdale or Beta Bricks and construct a school deep in the woods there.

The fees will be $2,000 per term for Grade 0 to 3, $2,500 for Grade 4 to 7. For the high school, because the children will be writing Cambridge exams, the fees will be $4,000 for Form 1 to 4 and $5,000 per term for A Levels!

Extra-curricular activities will include court tennis, table tennis, soccer (after ramming down some former maize field), netball, basketball, baseball, Yoga, Karate, swimming, show jumping, etc.

If the school enrolls two classes each for Grade 0-3 with 20 students in each class that’s a nice revenue account.

Bullish Group of Schools Revenue Account for the Year Ended XYZ….

Class	Total Students	Fees Per term	Revenue (Fees) Per Year
		$	$
Grade 0	40	2,000	240,000
Grade 1	40	2,000	240,000
Grade 2	40	2,000	240,000
Grade 3	40	2,000	240,000
Grade 4	40	4,000	480,000
Grade 5	40	4,000	480,000
Grade 6	40	4,000	480,000
Grade 7	40	4,000	480,000
Form 1	40	4,000	480,000
Form 2	40	4,000	480,000
Form 3	40	4,000	480,000
Form 4	40	4,000	480,000
Lower Six	40	5,000	600,000
Upper Six	40	5,000	600,000
			6,000,000

Now isn’t that a nice revenue account? Some listed entities would actually envy that. As for expenses, the investors will charge a bus levy to buy buses for students, books levy to buy books and sports fees to equip the sporting facilities. Incentives & donations will be used to pay for staff salaries, etc.

This venture will not have to increase fees to boost revenue, just the number of students and capped at 30 per class for quality!

Sounds familiar, doesn’t it?

With Lomagundi charging around $4,000 per term, Hellenic Preparatory $2,000, Watershed $4,000 and Falcon circa $3,500 per term you get the drift!

After paying an arm and a leg for Grade 2 First Term fees for little Miss Bullish Thoughts, Bullish Thoughts Snr was left convinced they might be a business case for investing in a school.

Any potential partners out there so that we get the ball rolling?

 Bullish Thoughts is offering his idea, connections at the Mash West Lands Committee and being Treasurer/Bursar for the school as capital.

Don’t worry about demand, a crusade encouraging procreation will be underway once potential backers are on board.

What is the Return on Education (ROEd)?

The investment aside: Are you getting your worth from the numerous schools after spending the whole term scurrying to raise school fees?

Will your child even see the doors of a university in future if education costs continue spiraling out of control?

Is it not time that you started seriously saving and investing to prepare and secure the future of your loved ones?

Not all will be able to continue walking on the financial minefield that education costs have become once they leave the C-Suite!

Just thinking aloud…

Blue chips shaft investors on the ZSE…

Delta Beverages hits 115.5c, Innscor 81c, Econet 520c… Except Econet Wireless, these are all time high prices.

If you are a retail investor, you probably were ALWAYS advised that you cannot invest in blue chips because they are not volatile…i.e.,  they do not move up significantly to generate sufficient returns for investors.

So you are probably holding some Truworths, Starafrica and other third tier stocks which are following financial market gravity while the blue chips accelerate in the opposite direction.

Is it too late to get into the blue chips? Bullish Thoughts thinks it is given that Delta has surpassed almost all the real and thump sucked target prices given by stockbrokers and various and equally experienced thumb sucking analysts.

But the whole development should indeed change your view of equities markets. Never mind the foreign investor angle!

Chitungwiza melee…Kun’anga hakuendwe masikati

Bullish Thoughts hopes that those that had visited Sekuru Shumba were not seeking “muti” against Bullish Thoughts whose Delta holdings keep appreciating in value.

Bullish Thoughts urges all prospective and current business owners to hone their business skills. Every Jack & Jill college/university is now offering basic business training and there are also a lot of free business courses being offered.

Also if you are in transport, you should know that a vehicle should be road worthy, have a VID fintness certificate, route permit, rank disc, etc. That way, you won’t lose money through fines and bribes. You won’t make persistent losses and you won’t need to visit a sangoma to plug ypur financial hell hole!

Last Bullish Thoughts says Kun’anga hakuendwe masikati (You don’t visit a witchdoctor during daytime)!

Invest Wisely!

Bullish Thoughts: Praying for the portfolio in 2013

Bullish Thoughts is a religious being by design and later on by choice. Being Catholic he was baptized while just a few weeks old while as an adult he chose the kind of Christian life he was going to live. So he does have a rough idea about Christianity and its dogma.

Over the past couple of weeks…if not months if we roll back to Judgment Night by Emmanuel Makandiwa back in April over Easter…a lot has happened that has caused many to rethink the meaning of their faith.

Many Christians grew up with the notion that you live a humble life on earth like St Francis of Assisi, Mother Theresa of Calcutta, etc and then you will get the reward in heaven.

Based on Jesus’ teachings in the New Testament, that made (makes) perfect sense. John in the gospel (Ch 14:2) even talks about Jesus telling His disciples that “In my Father's house are many rooms; if it were not so, I would have told you. I am going there to prepare a place for you.”

However, a few weeks after judgment night, at a man’s conference presided over by Emmanuel Makandiwa, Uebert Angel & an expatriate pastor, a shirt was sold for $10k followed by $1.5k socks (all second hand).

Since then, the earthly riches gospel has spread.

Bullish Thoughts is not sure if the two “prophet friends” are trying outdo each other.

The other prophet “reportedly” multiplied money in Botswana and in Zimbabwe, the other friend prophet said gold would literally rain from the skies. Bullish Thoughts is not sure if its desperation or its indeed God’s work and doing but last week a pastor in Makandiwa’s UFIC was already confirming the rural yard gold picking story as having happened in Muzarabani or somewhere close to that region.

Praying for the portfolio…

Bullish Thoughts is wondering where this leaves you as a Christian investor. Do you pray for supernormal profits? Certainly having your bank account balance multiplied at no cost or picking gold on your yard at no cost presents a supernormal profit.

Bullish Thoughts is so much into the capital markets. He should however confess that whilst being a religious person he never really prayed (at least directly) for God to move the price of Delta from 65c to $1 in a matter of weeks.

He never directly sought divine intervention stay clear of Steelnet, Gulliver, Cairns and all those other “WAS” stocks.

He does pray however for God's wisdom in money management!

Is it high time that he does ask directly for such %age term intervention? He is however having a hard time imagining the words of the prayer!

“Dear God, make my portfolio grow by 50% in Q1 in US$ terms so that I outperform all other fund managers or investors”.

Bullish Thoughts is afraid to prescribe the return he wants to God!

What does faith and investing imply to investors? Is your return a reflection of your level faith? Are you the Job of investments where you have to lose the portfolio to regain it tripled?

Bullish Thoughts is also wondering what you do when you buy a lotto ticket. Do you lay over it and pray too?

What Bullish Thoughts is trying to reflect on is the implication of want of earthly riches and co-existence with our faith as Christians. Is our material wealth a reflection of our level of faith? If you can sell your second hand shirt which you probably bought for less than $50 for $10,000 where does it leave you in God’s eyes?

Would we say the global financial crisis from which the USA and a lot of Eurozone countries are still to recover from is more like the great flood in the time of Noah? Granted, the world is probably a much worse place morally!

  

We are all investors and in all fairness work hard too to achieve earthly riches. And we pray too for our material prosperity. Only that you probably never prayed for Innscor share certificates to end up in your Stanbic Custodial Services Account without paying for them.

Bullish Thoughts has no answer to all this but he will be praying for the gift of discernment to be able to understand the Will of God amid all this.

Econet-TN Bank transaction...

Bullish Thoughts received a dozen emails requesting for his “thoughts” on the Econet-TN Bank demerger-delisting transaction.

Unfortunately Bullish Thoughts is still to wrap his head around the whole transaction. He does however appreciate that Econet is a telecoms company and after Meikles and KFHL disinvestments, it’s unlikely it will venture into non core business (still holds MBC though).

How long it will take to straighten this out is anyone’s guess. However, in the meantime Econet’s share price is back to $4.80.

Believe Wisely!

Bullish Thoughts: The Year 2013 Welcomes You

Bullish Thoughts closed 2012 in divine style.  As of 15 December 2012, Bullish Thoughts is now officially an "out of the money" and "off the run" asset to those who were thinking of delisting him or having some equity carve out at least!

Bullish Thoughts is hoping you had a positive end to 2012 too whether you are a business leader (with all that picketing by employees for bonuses), Church leader/ shepherd (with all those congregants looking forward to some divine intervention), or just a simple person/ employee (or laity as we call it in church).

Now that 2013 in here, Bullish Thoughts says to you May the Lord God:-

“Remember You Like Hannah

Bless You Like Abraham

And Favour You Like Mary”

So that this Year 2013, we shall all call you the Blessed One of the Lord!

  

Identity Crisis

Little Miss Bullish Thoughts wanted to go “back home” when we had only spent about 72 hours in rural Chivhu. Bullish Thoughts tried explaining that home was Chivhu where “rukuvhute” is. She would have none of it because home to her is Harare where there is Cartoon Network, Disney, Nickelodian, Sponge Bob etc.

Bullish Thoughts Snr will be working on that identity crisis this quarter!

We all know that you have just come back into the office (today if you are in the C-Suite) and would not want to read that much so Adios!