It surely has been long since the last Bullish Thoughts column… A lot has just been happening! Record levels of foreign investor participation on the ZSE in January 2013, hard run by blue chips among many trends.
Delta saw trades worth $14.1m, Econet Wireless $11.6m & Innscor $2.6m. On foreign trades, Delta was bought $11.8m & sold $1.8m, Econet Wireless was bought $8.3m & sold $1.2m, Innscor was bought $1.8m & sold $0.6m. CBZ was the counter seeing the biggest exit by foreigners at $2.7m against purchases of $0.8m.
Bindura was the biggest riser in January 2013 adding 107% with company reporting a 152% rise in JORC certified reserves. Unfortunately for Mwana shareholders, there was an accident at Freda Rebecca this past week which will affect gold production at the mine and the shares has since gone south.
Other top risers in January included Art (67%) which is in a fundraising drive and Afre (57%) which recently concluded a fully funded rights offer exercise.
Perhaps the riser of interest was Meikles Africa which was up 53% in January following reports of potential partnership with ZMDC to mine diamonds in the Manicaland area.
One would be tempted to think that Meikles probably was aware of some diamond deposits on its estates and judging by the rate of exploration activity in the region, it was only a matter of time before anyone could come across the “stake”.
Rock & Hard place…
Coming back to the market, there seems to be consensus that the bull has run and run really hard. Some share prices are already under pressure from profit takers especially Innscor already down to 92c from an all time high of 104c.
Delta share is also under immense pressure holding at the moment around 124c with Econet being the only one defying the financial gravity that has gripped the market currently with the counter now at 650c against an average consensus price of 680c.
So an investor is faced with these two scenarios: “ The shares are fully valued hence no upside and interest rates are coming down” with the latter being really a function of state intervention.
Where does an investor put money in this case. Interest rates at fairly stable banks are in the region of 5% p.a. and at the risky banks it is around 12% and weakening.
Where does one put money when faced with a scenario like this one? Property market is also not looking too good with voids being the order of the day in CBD offices.
Unless one has retail subsector property stock, the deal may end up tasting sour later on especially considering that property is typically very long term investment.
Bullish Thoughts waits for your feedback on where you think we can make the money this year.
Tobacco Selling Season: Let the bling bling begin…
Most people will remember the 2009/2010/2011 picture/image of tobacco farmers with flat screen TVs & satellite dishes boarding the flatbed Nissan UD trucks back to the farming regions of Karoi, Magunje and the like.
That was the bling brought about by tobacco farmers as prices shot through the roof (and output rose in some of the cases).
That resulted in an unprecedented increase in tobacco farming by Zimbabweans. Now 2013 tobacco selling season is here having opened on Wednesday with the highest quality golden leaves on auction fetching $4.70/kg against $4.45/kg on the same period last year.
Bullish Thoughts can only say the bling is on considering that tobacco fetched circa $517m last season. Unfortunately most of that money may never find its way back to the ZSE but perhaps TSL may stand to benefit especially if the share on opening day can be maintained!
Diamond: Econet Wireless (Price 650c, Return of 44.44% YTD, Market Cap $1,115,102,313)
Econet Wireless has been in the news quite a lot lately either for both corporate actions and just outright “newsy” stuff.
First it was the conclusion of TN Bank delisting from the ZSE followed by “banks” complaining that they were being excluded from the Econet Wireless Network for mobile money services.
Then followed announcement of a 10 for 1 share split and finally the appointment of an FNB Ops executive to CEO of TN Bank.
So could all that be related to the 39.99c that the Econet Wireless share price racked in the past week to trade at an all-time high of 650c on turnover of $1.430m?
Restructuring of TN Bank is certainly price sensitive…to what extent is anyone’s guess!
The share split is in a way psychologically price sensitive.
A stock split is usually done by companies that have seen their share price increase to levels that are either too high. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. This is the reason in the Econet Wireless circular!
A stock split can also result in a stock price increase following the decrease immediately after the split.
Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices.
Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices.
Already the market is rife with speculation that the Econet Wireless share price will probably reach 100c before the end of 2013, itself a psychological benchmark.
That would be interesting to watch given that at more than 600c the share has been fairly liquid.
A question that remains unanswered is on how much money was stuck outside the ZSE because the shares have very high absolute prices.
Diamonds & Dogs has no answer to that question but is of the opinion that if the company doesn’t declare a dividend again this year, investors may start fretting.
The capex phase is largely behind and debt stock is normal so long the cost is reasonable.
So naturally all the cash belong to shareholders and it must be paid out. A share buyback programme but most investors prefer the “Bird in the hand” rather than trying to create own dividend through profit taking.
It can’t be assumed that investors always want to sell.
EcoDividend looks like the only major way to please investors!
Dog: Innscor
Innscor lost 6c to close the week at 92c.
The counter has been under immense selling pressure from investors ever since hitting 104c early February.
On YTD basis the counter has however done well registering a capital return of 31.43%.
The half year numbers will soon be out for the retail giant and as usual investors expect a dividend from Innscor, Colcom & Natfoods.
Innscor has also been in the news first with the Colcom financial misappropriation which independent analysts put on as high as $3m (against an unbelievable $16,500 reported by the company).
It has also been accused of failing to comply with indigenization regulations.
The latter has raised questions on the definition of an indigenous Zimbabwean. Simply put, it relates to any grouping that was disadvantaged relative to economic activity prior to 18 April 1980.
Innscor is run largely by Greeks! Were they disadvantaged or not?
Ethnicity aside, the business is consumer facing across the portfolio and has capacity to churn out loads of cash.
Diamonds & Dogs however just loves the competition that has gripped the fast foods sub sector.
