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.
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