Diamonds & Dogs: Of $billion ZSE companies and tiddly widdly penny stocks

Diamond: African Sun (US1.01c, WTD: +18.82%, YTD:  44.29%, Mkt Cap $8,397,876)

Anybody remember the briefing in 2007 at Holiday Inn where Shingi Munyeza presented his view/vision of a billion dollar market cap African Sun backed by growth to almost 10,000 rooms?

That was the day the in-house brands were also talked about at lengthy….Amber, Ruby, Marble, etc were meant to wean the hotel entity from being shafted by players like InterContinental Group.

During those days African Sun eventually undertook the infamous rights issue at 8c per share when the market price for the counter had already had a resistance at 8c.

The business went into various regional operations (notably Nigeria) and at one point gave the impression that the Holiday Inn Accra contract was a deal forever whilst analysts were shown an artist’s impression (as Phil did with Pinnacle Properties projects) of Holiday Inn  Botswana.

However, it was not before long that the empire began to crumble before it had even taken shape and currently the market cap is 0.84% of the once desired $1bn.

Diamonds & Dogs however commended that management for “eventually” exiting loss making operations like the Grace in Rosebank and other non-core operations which cost the shareholders more than $10mn in losses combined.

In 2011, Diamonds & Dogs did get a chance to go and have a look at most of the operations in the Western region like Holiday Inn Bulawayo which then was undergoing material product upgrade, the ever popular Elephant Hills Hotel, The Kingdom Hotel & the jointly managed Victoria Falls Hotel. The only property not visited was the Hwange Safari Lodge.

What interestingly came out of those management contacts at individual hotel level was that before factoring in any finance costs, they were all profitable.

The inefficiencies were therefore at head office level: high overheads, expensive debt, acrimony with the landlord,etc.

The benefits of the restructuring exercise were not immediately recognizable as would be the case with any retrenchment and other such rationalisations.

The question therefore is: “Where is African Sun headed?”

There are still conflicting reports on the outcome of the landlord/tenant dispute which eventually saw restructuring of the Board of Directors at Dawn Properties level.

Resolution of that dispute will obviously be key in ensuring that African Sun management focuses on core business which is that of managing hotels rather than defend the hotel buildings!

Diamonds & Dogs is certain that he likes the hospitality sector…it’s just that the listed counters have largely disappointed investors.

The sector index as measured by the African Sun Tourism Index is seated at 24.08 points and is down 29.14% YTD and up 0.02% Y-o-Y.

Since dollarization, the sector has lost investors 75.92%. Quite unpleasant!

African Sun’s Weekly Trading Statistics

	Attribute	15-Oct	16-Oct	17-Oct	18-Oct	19-Oct
African Sun	Price	Bid 0.85c	1c	1c/2c	1c/1.3c	1.01c
	Volume	-	611,981	-	-	5,697
	Value	-	$6,119.81	-	-	$57.54

Dog: Interfresh (0.10c, WTD: -33.33%, YTD:  -66.67%, Market Cap $487,443)

Yes, it’s correct. Interfresh is valued at $487,443. That’s probably 2½ Mercedes Benz GLs and is still less than some of the houses along FolyJon Crescent in Glen Lorne Harare.

Diamonds & Dogs still remembers the Interfresh briefing where Executive Chairman Lish would preside over the discussions.

It was a company loved for no apparent reasons…may be it was the belief that where the Greeks have been, there must be money!

The briefing would then end with snacks and boozing until midnight as the bar would remain open so long the imbibers had capacity to down the wise waters.

After having 5 or so drinks, conversations would drift to stem prices and the rehabilitation and replanting (if there is such a word) as well as the solution to invasion of Mazowe Citrus Estates.

Then in 2007…banggggggggggg! The global financial crisis hit the world and the Eurozone in particular. This was the market, is the market and will always be the market.

While there was no market, the company tried producing the horribly tasting cordials/ juices. But then there was Mr Juicy those days and it was whipping anyone who dared enter the market to extend that even Delta Beverages bought a stake in Mr Juicy at one point.

Meanwhile debt was piling! And it was expensive too. The financials are not worth looking at right now.

The head office was sold off to deal with the huge interest costs.

Now the company is trading under cautionary. Diamonds & Dogs can only wonder what’s happening.

Even speculators seem to be staying away from the counter these days.

And in unstable markets, it usually makes sense to stay away from penny stocks and other tiddly widdly shares worth less than Phil Chiyangwa’s majestic rides!

One wonders how the ZSE can let a trade for $3.92 pass through the exchange. The gross proceeds are less than stamp duty and basic charge and other transactions costs!

Interfresh Weekly Trading Statistics

	Attribute	15-Oct	16-Oct	17-Oct	18-Oct	19-Oct
Interfresh	Price	Bid 0.10c	Offer 0.11c	0.10c	Bid 0.10c	Bid 0.10c
	Volume	-	-	3,924	-	-
	Value	-	-	$3.92	-	-

The Weekly Bulls n Bears

Top 5 Bulls	Bottom 5 Bears

ZSE Round Up

Market Performance:

·         Total market capitalisation rose 2.40% to close the week at $4.6bn. YTD +8.73%.

·         The industrial index closed the week 2.58% higher at 158.59. The mining index closed the week 0.99% lower at 86.63.

·         All heavyweights recorded gains this week, with Delta, Innscor and Econet rising  6.29%, 5.53% and 2.27% respectively.

·         African Sun, CBZ and AICO were the top gainers of the week, up 18.82%, 13.20% and 12.40% respectively.

·         RTG, Meikles and Interfresh recorded the most significant losses, down 33.33%, 21.74% and 15.00% respectively.

·         Volumes traded and turnover totalled 69.11mn shares and $8.93mn respectively.

·         Share volumes averaged 13.82mn shares per day.

·         Average daily value traded was $1.79mn for the week. Trades were dominated by CBZ, Delta and Econet which made up 25%, 24% and 17% of turnover respectively.

Other ZSE Market Statistics

The Industrial Index continued with its upward momentum, gaining 2.57% to 158.59 points in the week to hit a new high for the year.

Weekly Turnover Contribution

Invest Wisely!

Notes

**The author of this report does not hold shares in any of the companies discussed/ mentioned in this report.

** Statistical information was sourced from ZSE, IH Securities, BancABC Stockbrokers, EFE Securities & Bulls n Bears (www.bulls.co.zw)

Bulls n Bears

Email: bulls@bulls.co.zw

Website: www.bulls.co.zw

Blogspot: http://bullsnbearszimbabwe.blogspot.com/

If you wish to unsubscribe from this service, please click here.

CONFIDENTIALITY NOTE:

This message is intended for the addressee only, as it contains information that is privileged, private and confidential. If you are not the intended recipient of this message, you are notified that any distribution, use of copying of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately. Bullish Thoughts, Diamonds & Dogs and Bulls n Bears are products of Faith Capital (Pvt) Ltd. Faith Capital (Pvt) does not and cannot warrant the information sent via electronic mail or results obtained by using this information. This report has been prepared by 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 Faith Capital 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.