Bullish Thoughts: Of scaffold dancing Zoey, X-rated tapes & Entrepreneurship

Bullish Thoughts is Proudly Zimbabwean despite all the negative stories and sanctions upon him. He loves Zimbabwe’s climate. Right now some are melting in the Kariba, Chiredzi & Victoria Falls heat while others are freezing in Nyanga & Vumba yet others are with moderate temperatures in the mining town of Bindura.

Bullish Thoughts is surely grateful to be a Zimbabwean. He loves the generally peaceful environment and doesn't fear terrorists so long he remains in these borders.

Imagine you are busy drooling at Zoey attempting to scaffold dance (it would have been pole dancing if they did use proper poles) at some supposedly private lounge in a downtown joint and some crazy person just comes in and starts spraying everyone with bullets from machine guns. Just like that!

Or you are busy evaluating if there is a business case and or legal space to establish online business in Zimbabwe hosting lying down tape (some call them sex tapes) from Zim celebrities which are X-rated and someone just drops some nerve gas and kills all of you. Just like that!

Or you are picketing at a mine which you work at because you want the mining house to give you an increment and police which also wants a pay rise spray you with bullets from automatic guns and life goes on.

Or you are in a church on a busy and booming Sunday preaching or 

implementing gospelneurship (or is it gospreneurship) at some start-up spiritual calibration venture and clients…oops…congregants are outside the church buying some $1 bricks each which you bought for 10c each and some disillusioned militant comes and sprays the congregants with bullets. Bad for business and one wishes the pastors could do a "Kinjikitile Ngwale"!

Bullish Thoughts hopes you have now gotten the drift that whilst things are getting tougher by the day (evidenced by the increased shirts & shoes boot sales reminiscent of 2008) there could actually be worse things happening which are not.

Eating at the speed of light…

The weird and ghastly eating habits at dinner have come back for many men and certainly selected women of valour! Many spouses by this week have probably started having the conversation with phrases like “…are you being chased…”, “…why are you eating like a homeless man…”, “…chew your food…”, etc. Well, with the way power has been going lately, a lot have started eating at the speed of light! When a plate or nosh is placed in front of you would you rather risk eating on dark or you would prefer gobbling your food?

LPGeeing your way into entrepreneurship…

Bullish Thoughts is tempted to think somebody recently ventured into the LPG gas business and needs to make a killing before the next Cabinet reshuffle judging by the queue Bullish Thoughts sees everyday at his local LPG retailer (under a tree of course…). Bullish Thoughts thinks there is good money to be made from this LPG gas business and is willing to give it a shot. He will be doing some margins evaluation to see if he can break the 20% net margin barrier especially with way things have been going with some listed corporates earnings and share prices and the ZESA opportunity created by both load shedding & prepaid meters.

He has already set his eyes on a yet unoccupied tree as a target location with a nice catchment area. Yeah, Bullish Thoughts will be number crunching the gas business. He already knows someone with two 50kg tanks that don’t need a pump to use and can just be turned upside down and let gravity do the rest.

Bullish Thoughts is however debating on the name…will it be called Bullish Gas (which has a hazard of not being bought with consumers thinking of biogas, yes that biogas from the primary science project!).

Or he will just paint some metal signpost that reads GAS HERE! Who cares about a brand so long there is no power especially with the rainy season upon us!

Irresponsible accounting & auditing woodwinking investors…

Did you ever think established players like would start booking some weird millions of dollars as profit realised from debt forgiveness through above the line on the Statement of (Un)Comprehensive Income? Seriously, which supplier would forgive the debt of a highly rated borrowers like the tobacco players? And its not only tobacco players doing that. Look at most of the released financial for the reporting period that will end 30 September and you see how many extraordinary items came through above the line and carried the day?

Why don’t company management just own up like the likes of NMB have done that things are not so rosy and earnings are coming off?

Creative accounting is surely here to stay and shareholders be warned. Very soon we definitely will be seeing revaluations (biological assets & properties) coming back.

Cabinet brief: To be or not to be publicly whacked…

There was so much hype and hullabaloo from purported analysts on the local market that there was a gap created by the delay in announcing a Cabinet…something along the lines that there was significant uncertainty hence the market was falling. Bears were in charge!

The Cabinet came and there were no surprises. It was practically the same old fellas and some old new faces! Then the stock market went up some 5% or so and is still on an upward trend albeit amidst thin trades and some analysts are attempting to attribute the thin rally to the presence of a Cabinet!

Bullish Thoughts doesn’t have much to say except to ask what is bullish about saying that we will attempt to mortgage the minerals (again) in a falling market for commodity price?

Maybe it’s the perceived moderation in Indigenisation even though the President did attempt to be hawkish about the policy not the custodian of the ministry.

Well, it’s quite one thing to be smacked in public view and quite another to be whacked quietly! The previous incumbent would smack you in public and make you whimper in full view of everyone denting your confidence whilst the current indigenisation custodian is likely going to whack you in private and still get your investing ego tail between your legs. The only difference is you will have your public ego and confidence and hope for the best. No confidence lost but same end result! This way we could possibly say the Cabinet appointments were somewhat bullish!

Invest Wisely!

Bullish Thoughts
bulls@bulls.co.zw
+263 4 292 7658, +263 77 344 1674

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.

Bullish Thoughts: Cabinet(ing) the way to the bear market

How does one manage to maintain an optimist outlook in the face of such stock market aberrations? Is the decline in the stock prices a reflection of the political risk emanating from the liberation struggle party win or it’s a correction that was overdue?

Is it uncertainty emanating from a delay in the Cabinet appointments? Bullish Thoughts is having difficulties appreciating what effect an ideal Cabinet structure would achieve for the market.

There are two key components at stake here: Willpower & money.

Would the best Cabinet turn around the economy based on willpower alone or it will all eventually boil down to capital access (money)?

Bullish Thoughts thinks everything will eventually boil down to ability of the government to access external capital markets…itself a tall order given the country’s external debt position at more than $10.7bn.

The Indigenisation capital raise framework in the manifesto of the ruling party also require that someone should have the cash to buy the assets or capitalise the businesses to sweat the resources.

With the global commodity prices rout and rising costs of production, are foreign investors going to be very keen for JVs worse still with a heighted country risk premium?

What is the ZSE pricing....

Bullish Thoughts wonders what the ZSE bearish trend is pricing. The equities market capitalisation came off 22% in August though it is still 17% up on a YTD basis. Industrials lost 22%, heavy caps Delta, Econet and Innscor also lost ground retreating 27%, 28% and 22% respectively in the month of August.

Second tier stocks were not spared either with Dairibord declining 30%, OK Zimbabwe down 30% and BAT down 30%.

Many analysts were pointing to the fact that the market was overheating ahead of the harmonised elections and was overdue for a correction.

The prices are falling but it seems no one is pointing towards a correction perhaps due to the “resounding loss” that has been witnessed in the month of August alone.

Yes, we are all agreed that the almost record turnover of $54m witnessed on the ZSE is largely attributed to foreigners exiting the local stock market but again were the same foreigners not overly exuberant in the beginning?

Bullish Thoughts feels sorry for those Greater Fools who bought Delta at 157c, OK Zim at 31c, Innscor at 118c and BAT at 1402c.

Elections or no elections, one wonders what drives such investment decisions.

Furthermore, the interim results for half year to June 2013 have started coming to the market and what a mess they are!

Negative growth if not outright losses are the order of the day. Only banks appear profitable largely on the back of non-funded income simply because you can’t default on this one.

But the NPLs continue to be the sector’s Achilles Heel and for the banking sector at least the market was not too overconfident perhaps due to instability at a number of local banks.

The operating performance for the companies is not so good, bank deposits are declining, inflation is falling on the back of low disposable incomes and everything “that can smoothly go wrong is proceeding to do so”.

Bullish Thoughts is thus thinking that whilst the market decline may have been worsened by foreign selling, it is probably largely reflecting weak corporate performance and a subdued economic outlook and the current fundamentals do not seem to be supporting a platform for a bullish ZSE in 2013 good Cabinet or no good Cabinet!

But then they are just thoughts.

The Human Aspect at ZSE Listed companies…

While still looking at listed companies, Bullish Thoughts felt it is necessary to just look at how quality of management affects the performance of companies.

When trying to select shares to buy, it is easy to overlook the human aspect. But it is people who give life to the numbers, business models and product offerings of an organisation. It is people who make the decisions and take action. And it is people who craft strategy and allocate capital.

Ultimately it is the people in a business who determine its success or failure. Thus as investors, it is imperative to understand and have confidence in the people managing the companies we are investing in.

It is executive management who exercise the most profound influence over a company’s fortunes, as they have the power to direct its human and financial resources.

In order to find out whether management does indeed possess the desirable traits, you’ll need to study the business histories of each member of executive management. Important questions need to be asked such as: Who are they and how did they get to where they are? How have they fared in good and bad times? What impact have they had in other roles or businesses?

How a company performs serves as a marker as to the attitude and competence of its leaders.

Management competence is one of the critical traits. Many talk of Joe Mtizwa, the former CEO of Delta Corporation as a person who had exceptional competence.

Bullish Thoughts reckons its early days to judge the competence of Washington Matsaire, the current CEO of TSL and past CEO of Standard Chartered Zimbabwe and formerly acting Chairman of Standard Chartered Botswana.

The competence requirement essentially asks whether management possesses the skills, knowledge and understanding to run the business effectively. Before investing in a company, carefully examine management’s experience and track record in making strategic, operational and financial decisions.

A competent management team displays a deep understanding of the company’s products, customers and financial attributes. Look for evidence of this in company presentations and management statements. The chief executive especially must display a thorough understanding of all areas of the business.

Bullish Thoughts like many others always find it slightly uncomfortable when a CEO refers basic financial questions to the financial director during results presentations. The CEO should have a firm handle on all numbers in his business, be they financial, key performance indicators or market shares. How else is he/she able to make informed decisions?

Two areas of competence especially important is management’s track record in allocating capital, and how they have behaved during challenging times. It is critical that management is rational in its allocation of capital – that is, it spends the company’s resources on projects and assets that generate suitable returns.

Most management teams are able to do well in boom times. It is the lean times however, that reveal true skill and ability. A number of managers have failed to steer the ship in post dollarized Zimbabwe.

The Zimbabwe corporate history books are already filling up with balked operations and Judicial Management alerts for both listed and unlisted companies.

Challenging conditions reveal who has had the foresight to implement robust and resilient operating and strategic models. Competent leaders prepare for both good and bad times.

Unfortunately for most in Zimbabwe, the bad times are just proving to be too bad!

Invest Wisely!

Bulls n Bears Invest Wisely!
bulls@bulls.co.zw
www.bulls.co.zw

Bullish Thoughts: Entrepreneurial Development the future of Zimbabwe

Bullish Thoughts likes researching on matters of African development and Zimbabwe’s own entrepreneurs at large.

To this end he is always crawling on the world wide web of information looking for Zimbabweans who have made it big locally or in the world and how they have done it.

He was thus quite fascinated when he came across the interview of Dr Nkosana Moyo at the Harvard Business School Africa Business Conference.

Dr Nkosana Moyo is one of the few thought leaders from Zimbabwe that have managed to be granted opportunities to share their views particularly on development and youth involvement in the same development.

In the HBS interview, Dr Nkosana talked a lot about how the youth can shape their aspirations and make an impact on the global space moreso in this age of technology. (Bulls n Bears will upload this interview on its website soon).

Taking responsibility for one’s development and growth was the mantra of the interview.

Zim entrepreneurs of note…

Of course, the Zimbabwe Entrepreneurial history has got some very good case studies of Zimbaweans now in their prime who took their chances.

We probably all know of Strive Masiyiwa and the telecoms behemoth that Econet Wireless has since become (at least behemoth by Zimbabwean standards).

One would probably say, in the entrepreneurial and employment creation field, Econet Wireless is perhaps the epitome of a success story. In the same employer category is Divine Ndhlukula whose firm Securico employees at least 4,500 people on a diversified physical and electronic security solutions platform with a turnover in excess of $14m.

There is also Mighty Movies owned by Journalist Supa Mandiwanzira which began from humble beginnings. We should also remember that these guys once ran Rainbow Cinemas but were quick to realise that the business was going downhill with inflation and moved in to radio with ZiFM Stereo one of the most listened to.

Also in the tech and networks space is David Behr, founder of ZOL now part of Liquid Telecomm. Africom also did well in the early years but have somewhat gotten clouded with corporate governance issues (typical downfall for start-ups).

The Y Generation entrepreneurs…

Bullish Thoughts has to some extend seen the younger generation attempting to make their mark on the local space particularly in the media industry…Bulls n Bears included of course.

Others like Proposer Chikomo decided the “book writing route” and even managed to sneak his book onto Kindle Store and Bullish Thoughts just had to buy the book just to support great initiatives by fellow Zimbabweans.

There is TechZim covering tech related issues for the c ountry and somewhat beginning to influence debate on the Internet and networks front having held some conferences to that effect.

The rest are in the periphery…anonymous to say the least…and somewhat biased towards web development but not to the scale of BigLaw or C2.

Where is the rest of the Y Generation?

Do you have a Y Generation individual in your house? Have they made their impact yet no matter how small? Are you encouraging them and giving them the relevant support?

Is the Y Generataion of Zimbabwe hungry for knowledge and making a difference in the country? Are they pushing the frontiers of knowledge moreso with the advent of the Internet and mobile computing?

What is stopping the Youth of Zimbabwe from providing the ultimate solution to the challenges of excessive imports of basic goods into the country?

What is stopping the youth from doing basic projects like poultry and chicken so that the country does away with imported chickens and pork products?

Zimbabwe has:-

• ·         Water challenges (if you were ever in doubt about the water situation in the country, Harare in particular, the past two weeks should have taught you a lesson)
• ·         Power challenges (seems only Econet Wireless is taking advantage of this and Bullish Thoughts even uses an Econet Home Power Station in rural Chivhu @10c/ day
• ·         e-learning shortcomings
• ·         glut of tomatoes (in Mutoko & Domboshava)
• ·         the audacity to import chickens from as far afield as Brazil

All the above are problems require solutions. Can anyone think of a solution that can eventually be commercialised?

Most of the successful people we know of (whether employers or working for someone) started off in an even more difficult environment. They walked 10km one way to school, without shoes or uniforms and finished A level in some cases without never having seen a computer.

They still made it in business.

Supa Mandiwanzira (ZiFM) says:  “… The economic freedom train is taking off in Zimbabwe, Be on it!...!”

Dr Nkosana Moyo (MINDS) says youth should still get to university but with the ultimate aim being to spot and take advantage of opportunities and create employment. It’s not bad to get an education so as to be employed but the primary aim should   be being an employer.

Zimbabwe’s future lies in its entrepreneurs!

Invest Wisely!

Bulls n Bears Invest Wisely!

Bulls n Bears (Pvt) Ltd

55 Broughton Drive

Sunridge, Harare

Cellphone:          +263 77 344 1674

Alt. Email:            bulls@bulls.co.zw

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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.

Bullish Thoughts: Investor between a rock and hard place

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!

Diamonds & Dogs: EcoDividend?

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.