Diamonds & Dogs: Chimwe chikomba tasa

November’s bad omens have claimed scalp of various personalities & corporate legal entities before. Diamonds & Dogs is however not too sure why that month was deemed “sacred” in the Zimbabwe but this November was no exception.

One just needs to look at the rate of judicial management for local companies from those that sell cars to those that mill flour…yes flour!

Even the returns on ZSE were not so rosy. 10 counters generated 0% returns in the month, 12 traded in the positive territory while the rest lost value.

At least Diamonds & Dogs sailed through November without any incident.

Diamond: M & R (2.85c, MTD +43% YTD:  -78%, Market Cap $6,106,826)

M & R is soon to be remaned Masimba etc etc Holdings. Kind of reminded Diamonds & Dogs of the rural stores names like Kupfuma iShingu, Pfumamaoko, Kurauone, Usandivenge General Dealers etc.

The share price has never recovered following the purchase of 46.6% stake from M&R South Africa and Trinvest in a special bargain at 1.47c per share, compared to M&R's last-traded price of 7c then.

M&R South Africa spokesman Ed Jardim commented that M&R Zimbabwe was "heavily focused on manufacturing and no longer fits within the existing construction Africa and Middle East operating platform or the group's Africa strategy.

However, the 79% discount was so steep that SECZ was forced to investigate the deal. Results of that investigation are still not out though as a meticulous verification of the share price is still underway.

Not much has been happening at M & R though (the same with other construction companies) given that most construction taking place is of sub optimal scale with toll gates coming onto the portfolio.

It would be quite interesting to know the plans that Paddy & Canada have for the group or rather the order book that they have.

Dog: Pelhams (0.2c, MTD -83%, YTD:  -88%, Market Cap $1,991,297)

Diamonds & Dogs remembers quite well the Pelhams price hitting 0.85c post TN transactions which was naturally because of the takeover hyper. The counter also did trade for quite some time on that level.

Then it tanked.

Diamonds & Dogs for now will blame the fall in price to the weak operational performance at 1HY2013.

The company posted a topline of $4.2m, Gross profit $963k, operating profit $447k. The numbers were then weakened by $1.12m finance costs giving a PBT of $678k.

The company is targeting to break even in 2HY2013.

That Pelhams came to the credit market party too late is an open secret. The result was that by the time they came, most consumers had already bought their beds, wardrobes, radios, sofas etc from TN’s Lifestyle and TV Sales & Hire.

Anybody rember the half price for cash TN campaign?

Now Pelhams is in the market and all consumers are debt laden, the sofas are still fairly new to warrant replacement…so where is the performance going to come from?

Even if sales are on credit…what percentage of the available market is still willing to load on more debt?

Diamonds & Dogs has no answers to that but still believes that Pelhams still offers better quality goods compared to its new owners so it makes sense to make it a premium brand if merged with Lifestyle some time in future.

Too bad however if you were the Greater Fool that bought at 0.85c.

Cairns almost a goner now…

And it’s official…Cairns is now under judicial management. Diamonds & Dogs said it two weeks back that this company was in dire straits.

Now we can only say “Chimwe chikomba tasa”

Invest Wisely!

Notes

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

Bulls n Bears

Email: bulls@bulls.co.zw

Website: www.bulls.co.zw

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

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