Diamonds & Dogs: A dog called NicozDiamond

Diamond: Lifestyle (US1.50c, WTD: +36.36%, YTD: -40.00%, Mkt Cap $ 11,430,546)

Diamonds & Dogs will not comment much about the Lifestyle numbers given that they came through TN Holdings numbers and the demerger is fairly too recent.

He is however worried about the outlet strategy on those malls especially the Angwa Street& First Street ones.

Firstly, whilst the traffic is dense in that area, one would have thought outlet concentration would make sense in food and beverages not furniture.

Why is it that there is only one Mohammed Mussa in Harare and “everyone” goes to South Avenue for shopping? Because convenience is not necessarily the edge on consumer durable goods.

Diamonds & Dogs is certain that anyone who goes in the TN Bank Mall on First Street will be extremely worried about the sales per sqm given the swathes of empty space.

To make it worse, Innscor Fast Foods has been cutting down the prices and one wonders what will happen to the Grill outlet 10 metres away from Nandos, Steers, Chicken Inn, Bakers Inn, Pizza Inn, Creamy Inn. Some fights are not worth fighting in a closed ring.

The Slice guys knew that well and created their own space away from predatory Innscor fast foods and its paying off.

Diamonds & Dogs hopes TN Grill won’t be grilled by Zed Koudounaris and eaten as a takeaway.

Furthermore, Diamonds & Dogs thinks that the South African route will bleed the furniture business. SA furniture retailers know the price competition game and are willing to protect their turf.

To make it worse, SA is a credit market and there is no prize for guessing the extent to which credit cards have been maxed out.

Lifestyle is a low end furniture producer and exports may not bring the necessary revenues given the volumes required on low end goods.

High end exports (the Adam Bede type) would probably have allowed for niche market creation and hence command higher margins.

The Zim market is obviously saturated because a bed or sofa doesn’t have a repeat sale unless after 3 to 4 years. Liquidity crunch is biting and even with zero deposits, very few can afford the monthly installment.

The various corporate earnings are showing that disposable incomes are now wafer thin if not negative.

Perhaps its high time Lifestyle and Pelhams were merged to cut on costs and exploit any synergies.

Lifestyle’s Weekly Trading Statistics

	Attribute	27-Aug	28-Aug	29-Aug	30-Aug	31-Aug
Lifestyle	Price	1c/1.6c	1c Bid	1.5c	1c/1.6c	1.6c Offer
	Volume	-	-	13,000	-	-
	Value	-	-	$195.00	-	-

Dog: NicozDiamond (US1.1c, WTD: -45%, YTD: -0.63%, Market Cap $6,224,447)

General insurer,NicozDiamond, released its 1Hy2012 results to June 2012 and witnessed a 45% price decline in the aftermath.

Could the two events be related?

 NicozDiamond is undoubtedly one of the most regarded general insurers on the market. The company that has been under the stewardship of Grace Muradzikwa aka“Sister G” for quite sometime now has substantial brand equity backed by a credit rating on claims settlement.

Grace Muradzikwa, with over 24 years’ experience in the insurance sector has received numerous personal awards as well as on behalf of Nicoz Diamond. The awards were for first black female to list and head a publicly traded company in Zimbabwe, 1996 Insurance Personality of the Year, 2004 Zimbabwe Manager of the Year runner up, 2005 quoted companies Best Insurance Counter and Zimbabwe National Chamber of Commerce 2005 Businesswoman of The Year.

Muradzikwa is recognised as the first female managing director to win two IoDZ director of the year awards since their inception in 2004.

Diamonds & Dogs knows that you are now wondering if this is still about NicozDiamond or not. That depends on how you answer the following question:-

“Where will NicozDiamond be after the departure of Sister G sometime in the future?”

Back to insurance...general insurance has been suffering from an underperforming engineering and motor sector largely on the back of rate undercutting.

The rate undercutting particularly has been the undoing for the sector and saw IPEC threatening to intervene on the market in 2011. Unfortunately, the rate are only recommended and not enforced so insurers are left at the mercy of brokers who always threaten to take the account to the next insurer for a better price.

To make matters worse, the money and capital markets performance is not helping either.

Equities, which form a huge portion of general insurers’ investment portfolio are in free fall with Industrials down 9% YTD and Minings down 12% while money market rates are coming off on the back of moral suasion while stable banks are also quoting even lower interest rates.

That places, general insurers between a rock and hard place.

1HY2012 Results Summary

NicozDiamond

§ +20% growth in GPW to $14 million for the six months to June 2012 whilst reinsurance ceded increased by 58% to $6 million.

§ NPW grew by 9% to $8 million, the lower growth being the effect of the big jump in reinsurance ceded.

§ NPE fell by 7% to $6.8 million as the unearned premium reserve grew by $1.2 million in the first half compared to $556,587 during the same period in 2011.

§ Claims fell to $3.7 million from $4.5 million and contributed to the decline in combined expenses from $7.2 million to $6.7 million. Profit for the period was up $17% at $654,119.

§ Zimbabwean operations contributed 96% of the underwriting profit whilst FICO (Uganda) contributed the balance.

§ Going forward, NicozDiamond is pursuing the recapitalization of FICO.

NicozDiamond Weekly Trading Statistics

	Attribute	27-Aug	28-Aug	29-Aug	30-Aug	31-Aug
NicozDiamond	Price	1.3c/2c	2c	1.3c/2c	1.2c/2c	1.1c
	Volume	-	3,829	-	-	55,573
	Value	-	$76.58	-	-	$ 611.30

ZSE Round Up

Market Performance:

§ Total market capitalisation rose 0.54% to close the week at $3.73bn. YTD -6.09%.

§ The industrial index closed the week 0.75% higher at 132.27 points. The mining index closed the week unchanged at 89.04 points.

§ Heavyweights Delta, Econet and Innscor recorded overall gains for the week of 4.11%, 0.72% and 1.11% respectively.

§ LifeStyle Holdings, Interfresh and Afdis were the top gainers of the week, up 36.36%, 20.00% and 15.38% respectively.

§ PG Industries, NicozDiamond and African Sun recorded the most significant losses, down 50.00%, 45.00% and 23.47% respectively.

Flows for the week:

§ Volumes traded and turnover totalled 30.4mn shares and $2.8mn respectively.

§ Share volumes averaged 6.1mn shares per day.

§ Average daily value traded was $567k for the week. Trades were dominated by Delta, Econet and Barclays which made up 26%, 19% and 8% of turnover respectively.

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, EFE Securities& Bulls n Bears (www.bulls.co.zw)

Bullish Thoughts: Madora, Matumbu embudzi, Musoro wembudzi & Salad…It’s gotta be an army thing!

Bullish Thoughts is becoming very social (not socialite). Last Friday he attended the official launch of the “Airforce of Zimbabwe Commander Charity Dinner”.

Not that Bullish Thoughts has aspirations of being Lieutenant Major General etc but he was just curious to see how these army guys relate with civilians.

He was pleasantly surprised though that in a black suit, white shirt and bow tie (or is it ball tie?), Air Marshall Perence Shiri is actually a cool looking guy. Or maybe it was the old school suit maybe!

But for the benefit of all those who unlike Bullish Thoughts have not had the opportunity to wine and dine with these military men, these army men do not have green ears. They just look like the guy next door (or is it spy next door?).

They however have very odd (weird or military eating habits). When it was time to dine, Bullish Thoughts saw some weird food combinations from such man.

 

Rainbow Towers Hotel has good traditional food and also does reasonable western dishes. The wing commander (or whatever rank he has) decided to put sadza rezviyo (pap), matumbu embudzi/ zvinyenze (goat offals or goat tripe and cassings), madora (dried Mopani worms), fish, trotters AND fruit and vegetable salad in his plate (yah..that mayo filled cabbage salad)!

Bullish Thoughts can only say, it’s gotta be an army thing!

For your benefit, Bullish Thoughts will not reprint the picture here!

Back to the “Charitable” party. It was quite an eye opener to the other side (humane) of the Air force particularly in their project of building Murongwe Primary School in Dande. The project has seen student enrolment explode from 405 pupils during the pole and thatch classroom days to more than 600 pupils after only 3 classroom blocks were constructed.

Currently other classroom blocks are being constructed together with an administration block and a D House (as for the latter, only the school head knows what that means).

On another note, it was quite refreshing to hear a teacher speaking. The headmaster read his prepared speech well but forgot that he was using a PA system (forgive him because students are a naughty lot).

Sponsors for Project included TN, Oliver Mtukudzi, Delta Beverages among others.

Further work is still to be done towards this noble project including construction of a computer library (very vital in Bullish Thoughts’ view) and a secondary school which is now more than necessary given the primary school environment.

 

It may not be Murongwe Project, but Bullish Thoughts encourages all of us to make a positive impact in our communities by availing opportunities to those who badly need them.

Spare a thought for some kid in remote rural Zimbabwe today!

Bullish Thoughts commends the Airforce for this civilian initiative.

 

ZINARA personnel needs psychiatric help…

 Bullish Thoughts is scared…scared by the thought process exhibited by some of our fellow citizens. For his own mental safety, Bullish Thoughts is going to assume that Zimbabwe National Roads Administration (ZINARA) spokesperson was misquoted.

 How on earth does one open his mouth to say that toll gate fees will go up in line with improved toll gates! Not improved roads but improved toll gates!

Their byline reads: With Zinara, your roads are safe. So poetic! The roads are safe because fewer cars now travel on them because of their deplorable state. Not safe for the vehicles that travel the roads definitely!

Bullish Thoughts need not say more.

Joe Mtizwa…Overrated leadership skill?

Bullish Thoughts likes Joe Mtizwa. The man knew his numbers and business. Delta Briefing were the most useful. In Bullish Thoughts’ opinion, Joe Mtizwa resembled (and still do) an ideal corporate leader. It was thus befitting that he got a Lifetime Achievement Award & standing ovation at the Quoted Companies Awards.

However, it has been put to Bullish Thoughts that Joe Mtizwa did not do anything out of the ordinary for Delta… Capital was there through a supporting parent SABMiller (through share issues at very discounted prices) and therefore he did not face the liquidity crisis other executives faced. In summary, Delta was a well-oiled machine properly managed by SABMiller processes and anyone thrust into the hot seat could have done the same.

Bullish Thoughts has no comment on this but asks what’s your take on the suggestion.

Invest Wisely! 

 

Alpha & Omega Part II: Dearth of corporate leadership skills?

 Bullish Thoughts is worried…Yes, really worried. Only last week he was pontificating about how “excited” he was to have come across  an Alpha & Omega Dairies product in Chivhu in a country where Harare is closer to Mazowe.

Then he observed that when the Alpha & Omega General Manager, a Mr Nhari, when given the ideal opportunity to pontificate about how Alpha & Omega is going to transform the FMCG sector, he starts with a bucket-load of political insinuations.

To put it into perspective, this is a guy who has the abnormal advantage because his bosses/ shareholders “can” get free press coverage without even asking for it.

He gets his maiden interview with the press…at least as far as Bullish Thoughts is concerned. The guy opens his mouth and starts blurting stuff like “…contrary to public opinion, Alpha & Omega is professionally run…it is run by a competent board…it will perform despite the political affiliations of its shareholders…blah blah blah…”

Firstly Bullish Thoughts has never seen any negative press about Alpha & Omega besides the pun that Nestle Zimbabwe was the Project Manager.

Bullish Thoughts, who has a serious weakness for Dairy Products (cows’ that is…not that being interested in our other halves’ is a bad idea), was lauding Gushungo Holdings for value addition and coming up with a product quite at par with the market and now an executive forgets that he is not the shareholder.

Bullish Thoughts says to Mr Nhari (or hopes someone will tell him) that Alpha & Omega has the abnormal marketing advantage and he has to exploit it and get as much shelf space as possible in leading outlets like OK Zimbabwe, TM Supermarkets, SPAR & Pick n Pay.

Most people would be willing to try out the Alpha & Omega brand because they are guaranteed there is no use of GMOs as the cows are from Gushungo Farm.

Everyone knows who the owners of Alpha & Omega are and we all expect the plant to be kitted with the most economic and efficient equipment because it’s a modern establishment.

Seriously, what was Mr Nhari insinuating about ZANU PF and the quality of milk products at Alpha & Omega?

Bullish Thoughts can only say to all business leaders and managers (like Mr Nhari…) that people go into business to make money. No shareholders want a useless excuse…That’s why you were hired in the first place, too chart a new path and leave a trail.

Telecel…You gotta love the cheekiness

Bullish Thoughts has always loved Telecel even when it was blue. Their adverts are always top notch and with serious creativity. They should really have a really good Ad Agency.

However, it is what Telecel put together after the “once was” useful Net*One decided to dishonor its interconnection debts. While the Inspired Network  was fighting with NetOne, Telecel decided to put an advert: “Come to the network that connects you across all networks. So go ahead and tell someone”. Ain’t that just interesting.

Bullish Thoughts did write last year about competitors exploiting your public weakness. You all should remember the “No New Sim Card, No Bank Account & Connect to All Networks” by-line when Econet launched EcoCash last year while NetOne was asking subscribers to get a new sim card to get the same service.

On another note, does anyone know anyone who uses NetOne besides civil servants?

Bullish Thoughts was also quite intrigued by NetOne executive who took a populist decision and left everyone on post paid billing while Econet Wireless migrated everyone to prepaid. Now that they are paying for it, they are complaining that Econet Wireless made the business move.

Also did anyone notice that NetOne was not disputing it owed money to Econet Wireless but quantum. Out of interest, why does NetOne not pay that which it thinks it is owing Econet Wireless and then negotiate on the difference.

The minorities need confidence in the regulator & markets…

Securities Commission has been talking a lot about monitoring the markets especialy listed companies. Bullish Thoughts would be glad if SEC can evaluate if Turnall is being charged fair interest rates by the parent company.

Its finance bill for 1HY2012 was ridiculous and quite prejudicial to minorities in the construction company. Confirmation that any lending-borrowings are arms’ length and they the company is allowed to borrow elsewhere given the relatedness of the parties is crucial for investor confidence.

Capital Bank…New baby on the block?

Bullish Thoughts is disappointed that Capital Bank (formerly ReNaissance Merchant Bank) chose to parade its website during the launch (www.capitalbankcorporation.co.zw) on 24 August 2012 knowing fully it was not functional (if it existed at all).

Online presence is the modern way of getting information and in real-time too. By Sunday, Capital Bank was not existent even on Google. Bullish Thoughts hopes this will be rectified soon.

That aside, Bullish Thoughts was quite inspired by the talk given by Capital Bank Chairman, Dr Joseph Kanyekanye. It was quite refreshing and one can only hope that Capital Bank emulates other great African banking comeback stories. The classic one is that of Equity Bank of Kenya. In 1994, few gave a dime for Equity Bank’s chances. It had $262k deposits, $107k loans, 27 employees, $393k losses against capital of $35k so the bank was technically insolvent to the tune of $357k. Today Equity Bank has a turnover of $2.3bn and nearly 7,000 employees.