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.
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