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

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Bullish Thoughts: Cancer & Corporate Social Responsibility

Bullish Thoughts is mildly satisfied that Zimbabweans are now taking the cancer scourge seriously. Some corporates that have publicly taken a stance include TM Supermarkets.

If anyone scanned through the Sunday Papers this past week they would have noticed substantial health articles around Cancer.

Of interest was the warning against the use of various herbs either tightening or enlarging which have seen women in particular suffer silently.

As October comes to a close…ask yourself, what is it that you have done to combat this scourge.

You can donate cash or kind to either Cancer Association of Zimbabwe or Island Hospice who concentrate on dignified deaths.

Imagine if we could all donate at least $10 towards this cause…individually it may be a small amount but collectively it can make a difference to society.

It’s time we upped our Corporate Social Investments!

Or if you have no cash or anything else to donate, just wear the pink ribbon for the remaining days and raise as much awareness as possible.

The landmark National Conference on Cancer Prevention and Control organized by the Cancer Association of Zimbabwe held on the 16^th of September 2011 under the theme; ‘Bringing the Cancer Burden on the National Health Agenda’ and attended by over 80 delegates including political leaders, cancer experts, government officials, cancer survivors, civil society organisations, media, Non Governmental Organisations and the private sector noted that cancer is now killing more people than HIV and AIDS, TB and Malaria combined globally.

It also noted that Zimbabwe sees, on average, 7000 cancer cases each year and only a fraction of these – some 700 to 1500 is treated and that the HIV and AIDS pandemic is augmenting the rate of HIV-related cancers, with 60% of new cancers in Zimbabwe being associated with HIV and AIDS.

What is Cancer?

Cancer is a disease of cells. Cells are the smallest building blocks in our bodies, invisible to the naked eye. Groups of cells form the tissues and organs of the body (such as the lungs, brain, liver, kidneys or heart); each of these have a very specific function. Cells normally reproduce themselves by dividing in a regular fashion so that growth and repair of the body tissues can take place. If the normal function is disrupted, there may be an uncontrolled growth of cells causing a swelling or tumors. Tumors maybe benign or malignant (cancerous).

The cells that develop into cancer can be a result of foreign or harmful substances that penetrate the cell and its nucleus, damaging the DNA- deoxyribonucleic acid. Cancer causing factors include the air we breathe, the water we drink, diet, alcohol, tobacco and exercise we get, among other factors. Cancer could be a result of faulty DNA which will be recreated every time a cell divides.

The Warning Signs of cancer...

•  ·         Change in bowel or bladder habits
• ·         A sore that does not heal
• ·         Unusual bleeding or discharge
• ·         Thickening or lump in the breast or elsewhere
• ·         Indigestion or difficulty in swallowing
• ·         Obvious change in a wart or a mole
• ·         Nagging cough or hoarseness

 Consult your doctor or nearest health facility if any of these symptoms present.

Support Fundraising...

The Harare Cancer Centre is a welfare organization that relies on the support of wishers and the public for funding in order to achieve its objectives.

Help by participating in any of the following events:

·         Think Pink Golf Tournament

·         Triathlon

·         Walk/Run

·         Dinner Dances

·         Cuppa for HCC

·         Shavathon

Become A Corporate Partner...

The Harare Cancer Centre is extremely grateful to all the companies that have helped us one way or another. We invite other companies to join us in educating and raising cancer awareness. Invite us to your corporate wellness programs.

Investment Advice

Dear Bullish Thoughts

I am a 39 year old man. I am currently troubled by my relationship with my girlfriend who is 26 years old. Her parents died when she was 8 years then she dropped out of school because no one could afford to pay her fees.

I then met her when she was 14 years and sent her back to school.

I was selling fruit by the street just to pay her fees. I then got a job as a truck driver and sent the girl to university and now she is employed as a Finance Manager.

My problem is that she now feels she can't continue with this relationship because I am not her type.

She says she is grateful that I sent her to school but she can't be in a relationship with me anymore. She wants somebody in her own class not a truck driver.

My financial and emotional feelings are being hurt. I met to a stockbroker who advised me that if I had bought some Delta and BAT shares 12 years ago, not only would I be making Roy Turner green with envy but I would also have been a proud shareholder in African Sun, Pelhams, OK Zimbabwe and perhaps even Dawn.

The stockbroker also said with the shares I could have bought with the money I invested in her fees, I would actually be owning a truck company nearer in size to SABOT, CARS or even Takrose.

Above all, I would have paid for my own further education with dividends from Delta and OK Zim. I am also advised that the recent BAT dividend of 23c would have been adequate to help me retire early. Please help, I am hurting...Truck Driver.

  

Bullish Thoughts replies…

Dear “Could have been trucks owner”

Bullish Thoughts is not sure if he should feel pity for you. In fact he has just recalculated the opportunity cost of your investment…to you personally! It’s really humongous!

Though you did not explicitly say so, Bullish Thoughts is tempted to think you went into this solely for a scrip dividend…or hand in marriage put simply.

From a legal perspective, such contracts are called social contracts and are not easily enforceable at law as you cannot force someone to marry you just like you cannot sue your girlfriend for failing to pitch up at a rendezvous. You cannot approach the courts for performance by your almost “was” fiancé especially regarding the scrip dividend. Unfortunately ignorantia juris non excusat!

Next time when you want to do such investments or other such ventures (which Bullish Thoughts you will), it is recommended that you don’t be fixated solely on scrip dividend. What if it does not come? Or worse still, what if it comes, and the price tanks!

You should continuously evaluate your investments, disinvest when the risk starts to increase or take profit before the price falls or the stock becomes illiquid.

However, also look on the brighter side of things. You helped eradicate poverty and that woman certainly is paying tax (PAYE) that is enough to pay the salary of one or two civil servants so the economy is benefiting from your “social investment”.

If you have a potential investment case of similar nature again, Bullish Thoughts suggests you immediately approach the closest financial advisor.

Who knows, maybe another 10 years from now you will be in the category of Nick Van Hoog, Roy Turner or a real owner of a trucking company or vegetable processing company.

Alternatively, if you are still keen on scrip dividends, you may want to go back to the roadside where tomatoes are sold and evaluate those other stocks which are hidden from the eye of an ordinary marriage investor. They probably are valuable and gems in the rough!

Lastly…

Bullish Thoughts is confused by the current bull run on the ZSE. How big is the bag of cash out there? Are there many buyers or there is just one using multiple stockbrokers? Are the price levels still sustainable? Your little bullish thoughts are welcome so that we educate potential investors fully!

 Delta is at 92.4c, BAT 450c, Econet 491c, Innscor 81c and so forth. Should it be a buyers or sellers market?

Invest Wisely!

Bullish Thoughts:Working Out Doesn’t Just Make You Stronger, It Makes You Smarter…as an investor

We already know the facts: The world is in the midst of an obesity epidemic Zimbabweans included. Take a walk along First Street in Harare on any day and you will shocked at the rate at the number of women who without you being a doctor, can immediately observe to be medically overweight.

Of course men are included too but perhaps what has made women worse is the use of various chemicals for enhancing the physical structures particularly the bottom half.

Few Zimbabwean adults exercise enough, and that poor lifestyle choice is getting handed down to the children, who are also getting fat and overweight at record levels. Unless of course you are part of the uniformed forces!

 

And all that obesity is affecting health, causing heart disease, diabetes, unexplained sudden rise in cancer cases and other untold other health consequences. But what if the effects aren’t only physical?

This new infographic which Bullish Thoughts came across and felt it warranted your attention, points out that exercise has some great benefits for not just how our body works, but how our brains work, too. It’s clearly important for kids, who need all the brain power they can get for school, but it’s equally important for adults: A fit worker is a fast, efficient worker.

First, let’s review the facts. Children--who should be buzzing about with so much energy that we have to ask them not to exercise--aren’t moving around that much anymore.

Ironically, part of the problem is the diminished role of physical education (P.E) in many public schools.

Bullish Thoughts remembers very well how P.E was part of the primary education curricular back then in rural Chivhu. In fact, P.E was so important that there were competitions for various related P.E displays.

Nowadays, stats indicate that only one in four children get 30 minutes of daily exercise, and by the time they’re teenagers, only 12% are getting their daily recommended amount of physical activity.

So what? Bill Gates probably spent more time tinkering with computers than he did on the basketball court, and he turned out fine. But not all of us are Bill Gates. In fact, only one of us is. Most of us could probably use a little brain boost, and it turns out that exercise does just that. In studies of students, vigorous exercise was shown to improve IQ scores by 3.8 points--and test scores, too.

This applies to adults, as well. Exercise improves memory, releases brain-derived neurotrophic factor (a protein that makes your neurons healthier), and has been shown to potentially increase the size of your hippocampus--the part of the brain responsible for memory and spatial recognition. It’s no surprise, then, that college students who work out before class do better on tests, and workers who work out are more efficient.

The lesson? If your employees want to take a longer lunch break to hit the gym, you should let them. You’ll be getting more than enough out of them in the afternoon to make up for the lost time.

See the full infographic below, if you’re not too busy at the gym:

Mr Fund Manager….

After hitting the gym, Bullish Thoughts bets you that Mr Fund Manager would be in the right frame of mind to know that it’s time to take profit after the market rally, offload some ZECO & MedTech shares and appreciate that the more money you have, the harder it becomes or risky rather, to trade penny stocks!

Or perhaps you will understand why you missed the BAT rally and a healthy dividend payout at the same time.

That brain surely needs financial exercise.

Exercise & Invest Wisely!

(Report on fitness by OnlineCollegeCourses.com, Additional editing by Bullish Thoughts)