Diamonds & Dogs: You don’t have to be a smoking addict to get the BAT dividend

 Diamond: British American Tobacco (730c, YTD:  102.78%, Mkt Cap $126,885,074)

Diamonds & Dogs does not smoke cigars and or cigarettes, has never smoked and will never smoke.

However, he couldn’t help but take not of the BAT share price rally from the time the 1HY2012 results were released to the period post FY2012 results.

The counter has rallied hard again in 2013 following FY2012 financials that registered attributable profit that was up 151% at $12.3m resulting in earnings per share of $0.71.

The shareholders were blessed with a final dividend of $0.42 bringing total dividend for the year2012.to $0.65.

The big question on any investor’s mind is whether $7.30 is still a god price for the counter. There is no doubt the aggressive dividend policy will stay with the company which can easily gear the balance sheet should the need for capex be there.

But will the dividend yield alone going to be a sustainable return without complementary capital gains.

Diamonds & Dogs doesn’t have any answer to that say to say the company is definitely a dividend play.

BAT markets both Global Drive Brands (e.g. Dunhill &Newbury) and local brands like Madison, Everest, Kingsgate and Berkeley. Madison is the flagship brand contributing about 68% of volumes. Premium brands constitute up to 25% of sales volumes.

The premium brands never saw the decline in volumes that was witnessed on mass market following price reviews upwards on the back of increases in excise duty.

Diamonds & Dogs can only say surely the smokers are holding on to their Madison!

Dog: Aico (4.90c, YTD -45.56%, Mkt Cap $26,165,374)

Diamonds & Dogs feels sorry for institutional investors stuck in Aico. The equities gods are surely angry with the Aico shareholders.

The share price for the company has hit basement lows and shows no sign of recovering as the promised “series of transactions” take ages to be done.

The debt hellhole is certainly inching beyond the $50m reported sometime back when the fundraising exercise was proposed.

Potential investors have come and gone.

Now there are proposals to further unbundle the group and unlock shareholder value.

Unfortunately, that too may feel the SeedCo spanners (the flagship of the group) following dismal performance from the “African See company”.

Aico’s woes have not been helped by the cotton price wars which will not go away unless the cotton price sustains its upward trajectory that has seen it recover to 87c/lb so far.

But again, a good cotton price is no use when most farmers (those in regions that allow crop change) migrated to the toast of the moment tobacco.

In the meantime the Aico investors have had to content with series of cautionaries (which can make a good novel entitled “The Art of Repeat Cautionaries” if one compiles all the releases since the exercise started.

Diamonds & Dogs is lucky to have last dealt in Aico shares years back when he liquidated his position at 21c per share.

He, however sincerely hopes that the corporate restructuring exercise will bear fruit not in the too distant future for the sake of cotton farming in the nation and shareholders of the stock.

Invest Wisely!

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a subsidiary 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 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: Happy…. we drink to celebrate the Happiness; Sad…we drink to drown the Sorrows

Diamond: Delta (112.50c, YTD:  12.50%, Mkt Cap $1,343,953,397)

Diamonds & Dogs is quite fascinated by the trends on the ZSE. The market has been bullish since the beginning of the year…in fact, prices have been going up since fourth quarter 2012.

The prices have not stopped rising…the foreigners have not stopped buying too. That foreign activity has been behind the surge in share prices for the large and mid caps.

By large on the ZSE Diamonds & Dogs refers to those “blue chip” counters with market capitalization levels above $500m (Innscor, Econet & Delta) while mid caps looks at the $90m plus range.

That should not be surprising. Typically, foreign investors tend to invest in companies of substantial scale given the cash that they will be holding, e.g., most players have mandates that look only at companies with market caps upwards of say $50m or $100m with the common threshold being $100m.

That thought process seem to support the foreign inflows allocation on the ZSE

In January 2013, Delta saw total trades of $14,197,291.45 (39% of total trades) with foreign purchases of $11,875,187.35(46% of total foreign purchases).

In February, total ZSE trades rose to $45m with Delta commanding $16.59m (37%) of the total monthly trades by value again largely driven by foreigners.

Delta is definitely not the best counter on a YTD basis (BAT takes the trophy amongst the serious stocks with its YTD of 101% backed by a 42c total dividend for the year) but the participation of foreign investors on the counter causes it to be in the league of its own.

It has charted new territory on the ZSE. Of course, other counters like Econet, Innscor & Dairibord have also seen foreign investor interest.

Delta has strong fundamentals being the defensive stock that it is. After all, when happy people drink to celebrate and when sad, they drink to drown their sorrows.

That has seen strong demand for Delta products whether CSDs or clear beers. 49% owned Schweppes is also flying. Only “masese” seems to be struggling.

Investors are now anticipating aggressive dividend policy to come through from the beverages giant going forward now that the bulk of core capex is behind.

As to whether there is still significant upside left in the counter, that’s anyone’s guess but there seems to be market consensus that currently the counter is nearing full valuation but remains a strong dividend play.

Diamonds & Dogs can only speculate what will happen when elections results are decisive and or  civil servants get a salary review of significance to the wise waters demand.

While in the rural areas this past weekend Diamonds & Dogs witnessed an acute shortage of “masese” attributed by the rumor mill to a breakdown of the Chitungwiza plant.

Going forward, with emerging markets being the new investment frontier, Zimbabwe is definitely getting onto the map of those players struggling with single digit returns.

Dog: Lifestyle (0.30c, YTD -25%, Mkt Cap $2,286,109)

Diamonds & Dogs was one of the few who commended the foray into consumer durable goods by the TN Holdings (eventually to trade under Lifestyle banner).

It made sense anyway then. After years of failing to replace beds, wadrobes, radios, etc, the credit model worked perfectly for Lifestyle.

Dimaonds & Dogs was worried only about quality issues. Would the consumers be convinced that Lifestyle was also a purveyor of quality products? Would it venture into luxury consumer durable segments? (Mind you money is there in Zimbabwe…it’s just inequitably distributed).

Diamonds & Dogs has no answers but seems to be convinced that the consumer durable goods route may be troublesome especially if issues of merchandise quality come to the fore. Plus, a bed is not replaced every now and again hence there are no repeat sales here.

Perhaps the fast foods will carry the day going forward but again Innscor & Chicken Slice are watching the developments closely!

Time will tell what will come out of the Mauritius structures. Diamonds & Dogs will not comment on these suffice to say, he hasn’t as yet wrapped his head around it.

Invest Wisely!

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 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.