ZSE just $65m trades away from surpassing F17 turnover

HARARE – The Zimbabwe Stock Exchange is just $65 million trades away from surpassing the $694.96 million turnover value achieved the whole last year, amid expectation that if the current economic situation maintains, the stock market could for the first time hit the $1 billion turnover mark.
At the close of trades on Wednesday, turnover was $20.04 million, the bulk of which was comprised of foreign investors with $18.2 million invested in Delta from 5 million shares. Foreign buyers totalled $19.15 million while $962 865 sold.
The ZSE set another market cap cap record of $19.5 billion after the Industrials Index surpassed its all time high, which was achieved on November 14, 2017 of 534.13 after it surged 15.96% to $593.82.
Investors continue to pile into the stock market amid concerns about the exchange rate and rising inflationary pressures. The script is similar to last year’s ZSE performance in Q4 where shares hit record highs to hedge against the loss of value on RTGS deposits after the US$ black market rate started creeping up towards 20%. A lot has happened since then including the ouster of long time President Mugabe.
The gains came as Finance and Economic Development minister Mthuli Ncube issued a statement that the exchange rate on RTGS deposits will be maintained at par with the US dollar in spite of earlier statements where he said he would leave the market to decide the exchange rate.
The All Share Index was 16.14% higher to 176.52 while the ZSE Top 10 Index put on 18.03% to 190.64.
The Minings Index traded past the 200 level after it gained 19.2% to 203.65 but is still to beat the record of 272.21 achieved in 2011.
On the price sheet there were no fallers with bids congesting the line. BAT Zimbabwe put on 17.85% to 3300c, Delta was up 19.93% to 364c, Econet, which is currently trading a cautionary which will result in multiple transactions, added 19.90% to 244.25c.
General Beltings led the risers after it gained 36.04c to 1.51c but slightly below its year high of 1.55c
Meikles traded flat at 65c after Government took the company to court seeking to overturn a payment on a long-running debt issue.

Ncube retracts London statement, says RTGS deposits will be maintained at 1:1

HARARE – In what could largely be interpreted as a retraction of sorts, Finance and Economic Development Minister Mthuli Ncube has said that Government remains committed to preserve the value of RTGS deposits at the current exchange rate of 1 to 1. This he said is being done in order to protect people’s savings.

Ncube’s comments come after earlier his statements at an investor roadshow in London on Monday, had caused pandemonium within the market. Ncube had said that the market had already determined that RTGS bank balances are not at par with the US dollar and that Government would not intervene on devaluation and to control parallel market rates.

“The market has already determined that RTGS and bond notes are not at par with the US dollar and I am not about to argue with the market,” he told a roadshow at Chatham House.

His remarks saw most suppliers change their pricing terms while some products and services were withdrawn from the market due to the pricing conundrum. At what price should producers sell, particularly in a market, which outlawed any tier pricing systems.

In today’s statement, Ncube said: “Government recognises concerns surrounding RTGS deposits, and we commit to preserve the value of these balances on the current rate of exchange of 1 to 1, in order to protect people’s savings.”

He said that the challenges Government is facing, which include cash shortages and the proliferation of foreign exchange parallel market rates which have a negative effect on prices, require that Government position the economy on a strong footing by implementing reforms.

“Such reforms  include cutting on government expenditure, working towards import parity pricing system, increasing efficiency on government delivery systems and fast-tracking the State Owned Enterprises reforms, among a host of reforms.”

He added that the reforms should be accompanied by a strong and sustainable currency reform system. “This is necessary to ensure that any currency reform programme that the Government would put in place is effective and that it has minimum disruption to business.”

Ncube said in view of the need for an orderly currency reform programme that will be followed when the economic fundamentals are right to do, the country shall continue to use the multi-currency system which was put in place by Government in 2009.

“This system entails that foreign exchange earners are not prejudiced of their regulatory foreign exchange receipts and that those who do not earn foreign exchange have access to foreign exchange through the banking system as is per the current policy of foreign exchange management system. In parallel, the Reserve Bank shall continue to maintain adequate resources for the import of essential commodities.”

He said over and above the Nostro Deposit Protection Guarantee from Afreximbank, the ministry is also reinforcing Nostro foreign currency accounts with a statutory instrument to guarantee that these are private deposits, and neither the Reserve Bank nor government has any access to them.



Zimbabwe stock market rallies to new record highs

HARARE – Zimbabwe Stock Exchange shares rallied strongly to new record highs on Tuesday as investors continue to hedge against inflationary pressures following the admission by Government that RTGS, bond notes were not at par with the US$ and that they were leaving it to market forces to determine the true value. Already, since the announcement of the Monetary Policy Statement last week, where the governor Dr John Mangudya separated foreign currency accounts from RTGS balance, parallel market rates have rallied to as high as 300% to the US$.

However, Dr Mangudya maintained the official exchange rate at 1:1, a position which has left many companies in a conundrum with regards their pricing structures. At what price do they sell their products, most of which have an imported component? Analysts believe that that the constant loss of value of RTGS/Bond notes present the biggest risk to companies at the moment. Already products such as beer and bread are in limited supply while on some lines the prices have more than tripled.

At the close of Tuesday’s trading session, the market, which had been somewhat lacklustre before the Monetary Policy announcement last week, rallied to new highs on its market cap to $16.7 billion, beating the previous record, which was set last year, just before the ouster of President Robert Mugabe of $15.16 billion.

The All share index and the Industrials index both went up 13.23% and 13.18% to close the second session of the week at 151.99 and 512.09 respectively. The ZSE Top Ten Index rose 14.82% to close at 161.52 after strong trades in Econet, Delta, Innscor and Old Mutual.

Beverages concern Delta, which has not effected any price increases went up 19.95% to 303.50c.  Telecoms giant Econet maintained the buoyancy seen after it announced that it will unbundle its fintech unit and convert debentures into equity. The counter put on 19.31% to settle to 203.71. Old Mutual was up 19.93% to 884c as the group prepares to unbundle its banking unit NedBank. Innscor, which is targeting to be a $1 billion revenue company in the next 15 months, rose 19.86% to 169c.

The Minings Index was up 1.40% to 161.52 after gains in Bindura Nickel and RioZim. RioZim put on 0.71% to 141c after the group announced its intention to sue the central bank for not sticking to its directive on foreign currency retention. The group said it had only retained about 15% since 2016.

Total turnover was at $9.6 million as 20.6 million shares exchanged hands in today’s session. There were no foreign sells, but foreign buys amounting to $44 752.


Change in sales mix boosts Truworths F18

HARARE – Modification of the Truworths Limited credit offering for Apparel and Homeware products saw the group’s margins improve in the 52 weeks to July 8, 2018. Revenue in the period increased 9.46% to $16.26 million from $14.86 million in the prior period.

Chief executive Temba Ndebele told analysts last Thursday that the group had managed to return to profitability due to the change in the sales mix.  Retail sales were 9.7% higher at $13.45 million.

The group saw increased GP margin at 50.9% (2017: 40.2%) due to increased sales at full margin and no markdown in the period compared to a markdown of 13% of sales last year, and a change in sales mix in favour of apparel.

Credit sales made up 67.3% of sales from 70.6% last year, cash sales were 30.8% while lay-bye sales were at 1.9%. By store, Truworths cash sales were 30% higher and credit sales were up 11.6%. Topics saw a 35.3% increase in cash sales but credit sales were down 1.3%.  There had been an increase in the number of accounts to 91 745 from 88 982.

Other income of $646 303 related to income from the CABS credit card facility. The group’s manufacturing unit reported a loss of $10 365, which narrowed from the $171 739 loss achieved last year. Trading expenses were 6% lower at $8.08 million than last year although there had been an increase in employment costs due to return to full time work for all employees in September.  Employment costs were 4.4% higher and Occupancy costs were down 14.2% but made up 16% of retail sales.

Ndebele said occupancy costs had declined due to store closures. Six Number 1 stores had been closed down and this had also had an impact on lease expenses which were down 13.5%. Other operating costs had increased 3.1% due to higher distribution volumes than prior year and increase costs of computer consumables and motor repairs.

The group had extinguished all long term and foreign obligations while short term borrowings were down 3.9% to $7.5 million. Trade receivable costs decreased 48.1% after the net bad debt write off was 28% lower than last year. Trade receivables were down $8.98 million from $9.05 million. Doubtful debt allowance charge for the year was down 53.3% and debt collection costs were down 12%.

Operating profit was 15.1% of retail sales at $2.02 million after the group overturned a loss position. Subsequently the pre-tax line was at $1.11 million from a loss of $2.38 million and the bottom-line closed at $806 916. The group’s return on capital and NAV were at 14.6% and 1.02 in that order.

Giving an update on performance post year end, Ndebele said sales for the two months (July and August) were positive on the apparel side. Truworths sales had gone up 26.7%, Topics 41.6% and Number 1 at 52.3%.

Ndebele however said that shortage of foreign currency will continue to pose a challenge to product availability and will negatively affect product supply and sales. “Resurgent inflationary pressures will negatively affect consumer disposable incomes and confidence.”

Our thoughts on Truworths:

In the just-ended earnings season, there have been a host of different outcomes depending on what band of inflation you find yourself in, which ultimately determines whether an increase is due to inflation or inflation and some growth. Generally, top lines have risen by 20%-30% and the bottom line depends almost entirely on whether you have a large imported component in your cost of sales – but it is anything from 10% to 200%.

For all the brouhaha about the economy growing, Truworths (and for that matter Edgars last week), have high imported components in their goods, and had different outcomes – Edgars did the industry standard of 30% on the topline and 200% on the bottom-line, while Truworths was 9.7% and a return to profit. Firstly, lets qualify that Truworths was reporting YE results, so a direct comparison is unfair and it’s also difficult.

By its own admission, Truworths makes its annual profit in the two weeks over the Christmas period and has a quieter H2 – this year H2 was as strong as H1 and activity in the past few months has warmed up even more with Topics and Number 1 reporting sales growth of 41.6% and 52.3%. Ndebele gave two examples of people walking into stores and buying everything in a single line as they worked out the “value proposition” of buying the items on credit.

Behaviour such as this, and profit increases of the order of the past earnings season are out of keeping with a “low inflation economy” such as is claimed by the authorities. But it was not so much the results of these two retailers, but the “other evidence”. If this economy was roaring, the number of accounts would be too. Edgars had slightly fewer overall, while Truworths had slightly more and the number of outlets increased marginally.

Much will depend on what happens over the next month as the past year of “economic growth” has been driven by quasi-fiscal expenditure programmes (Command Agriculture and “subsidies” for small scale miners) that have put money in peoples’ pockets. Whatever may be claimed, this drives inflation and many of us have seen this picture before. As Ndebele pointed out, it really depends of what level of debt Truworths opts to take on to finance this.

As is the case with varying levels of inflation, there is also a varying levels of valuations in the market and, as was the case in 2003 when the first Great Stock Market Rally of the inflationary period started (with NMB’s note on the expected performance of Colcom F03), it is not quite apparent what will ignite this in the market. The top stocks are sitting on PEs of 20-30 while others, most notably the banks, are on single digits historic PEs.

We have seen revaluations of some of the smaller companies in recent months – among them the long overdue rise in Powerspeed, Proplastics, Turnall, and Zimplow – even Truworths and Edgars have been on the move – but there is a good deal of value in the lower capitalised retail stocks – Truworths ($5.45m) with its 61 branch network is certainly among those – and we are only going to see earnings acceleration in the year ahead. – FinX

Consolidated Income Statement   
Details8-Jul-189-Jul-17% Change
Retail Merchandise Sales13,458,04812,267,6439.70%
Trading Expenses8,080,5458,600,802-6.05%
Finance income262046525234353.85%
Operating Profit2,026,119-1,228,015-264.99%
Finance Cost-911,228-1,152,813-20.96%
Profit/Loss before Tax1,114,891-2,380,828146.83%
Earnings per share0.21-0.47144.68%
Consolidated Statement of Financial Position
Details8-Jul-189-Jul-17% Change
Total Equity3,881,4423,074,52626.25%
Total Assets16,291,45115,891,2482.52%
Current Assets14,866,10214,147,4275.08%
Current Liabilities11,970,30211,270,7176.21%
Current Ratio1.241.26
Statement of Cash Flows
Details8-Jul-189-Jul-17% Change
Cash Flow from Operating Activities1,672,5141,404,14519.11%
Cash Flow from Investing Activities-70,553-26,678164.46%
Cash Flow from Financing Activities-1,583,332-1,419,28311.56%
Closing Cash and Cash Equivalents456,163437,5344.26%

Caledonia’s Blanket Mine lifespan extended on increased exploration

HARARE – Canadian based mining firm, Caledonia Mining Corporation says due to increased exploration activities, it has identified additional gold reserves at its Blanket Mine, which will extend its lifespan.

The mining firm owns 49 percent stake in Blanket Mine in Gwanda, Matabeleland South province.
“Today’s resource upgrade is yet another positive step in our journey as we invest for the long term future of Blanket.

This upgrade takes our total resource endowment at the mine to almost 1.8 million ounces. We have increased total resources at Blanket by 86 percent since 2011 in addition to mining over 300,000 ounces over this period,” chief executive Steve Curtis said in a statement on Thursday.
The resource upgrade marks the seventh successive year of sustained resource growth at Blanket mine.

“The increase in the Measured and Indicated resource base of 13 per cent to 805,000 ounces is good news for the longer term life of mine plan at Blanket and underscores the overall confidence level in Blanket’s resources which is underpinned by the planned increases in cash flow and production as the investment in our Central Shaft comes to an end.”

The grade of the ore body remains consistent with the company’s expectations and continues to be well above the current mined grade at Blanket of 3,3g/t. Curtis said the nine per cent increase in the inferred resources at depth to 963,000 ounces shows the longer term potential of the mine.

The group is optimistic that the Central Shaft project will set the mine up for many years. “I am confident that the life of mine will be further supplemented by resource additions and upgrades as a result of the increased exploration activity at Blanket in the future,” he added.

As at June 30 2018, Caledonia had net cash of $5.3 million.  Blanket is poised to produce about 55,000 to 59,000 oz of gold by year end.

Caledonia targets to produce 80,000 ounces of gold by 2021.

Econet considering debentures to equity conversion

HARARE – Econet Wireless Zimbabwe could be considering a debenture to equity conversion, people with knowledge in the matter have said. This comes after the group issued a cautionary statement to shareholders in which it said it was engaged in discussions and is considering various proposals, which if implemented may have a material impact on the value of the company’s shares.

Well-placed sources told FinX that the group might be looking at converting outstanding debentures into equity. This comes as the group last year raised $130 million through a rights issue and a linked debenture sale. During that time, shareholder concerns had been raised on the structure of the debenture and through an amended resolution, which was passed, Econet had a buy back option of the debentures for those who did wish to hold on to them. Econet argued then that the debenture was an instrument which would give investors a definite return. The sources said over the past few weeks, Econet has been approaching investors who wish to sell their debentures.

“Econet is full of surprises and there is speculation on what their cautionary could be about but everything points to the debenture/equity conversion, given that they have been buying them back.”

At its last results briefing, Econet said it desperate to find a quick solution to circumvent regulatory challenges which had hampered plans to list $50 million debentures on an external securities exchange to protect value for shareholders who bailed out the company.

Econet said while its board had wanted to list the debentures issued by the company on an external securities exchange shortly after the rights issue, the relevant authorities did not approve the request for a sinking fund, which it intended to use to repay the liability.

The cautionary may also relate to plans for an initial public offering by Liquid Telecom in London. However, market players say this is highly unlikely as Econet only owns a part (51%) of Liquid Zimbabwe and not the broader Liquid Telecom. Others say that it could signal the unbundling of either Cassava (which holds Ecocash) or Steward Bank from  the group.

“Shareholders, debenture holders and members of the investing public are therefore advised to exercise caution and consult their professional advisors before dealing in the company’s shares until further details of the transaction(s) are announced or upon withdrawal of this cautionary,” said Econet in the cautionary statement.

Externalisation probe begins


Finance and Economic Development Minister Patrick Chinamasa has said government has started investigations to identify individuals and companies involved in externalising foreign currency from Zimbabwe and in turn fuelling the current cash crisis. Zimbabwe is battling an acute cash shortage attributed to several factors chiefly externalisation and low exports. The country’s monetary authorities have introduced several measures to curb the cash shortage including closely monitoring the way some companies handle their cash following concerns that big firms, particularly retail businesses were not banking their daily takings. Chinamasa said externalisation continued to play a huge part in the cash challenges the country was facing. He encouraged wider use of plastic money and other forms of electronic payment as a substitute for cash. On the budget deficit, Minister Chinamasa denied any fiscal indiscipline on the part of Government. –   Herald


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Industrials onslaught continues on select heavyweights

Industrials onslaught continues on select heavyweights

HARARE -The unrelenting stock-market bull run demands some respect as it has been on the rise for 10 consecutive weeks on the back of increased local demand and reduced foreign selling.

The gains in most stocks coupled by increased demand powered the Industrial index to 171.73 (+1.35 points). Outstanding gains for the day were in CFI (+8%), FBCH (+8%), Mash (13%) and Zimpapers (25%). Activity the Minings category improved albeit all counters trading flat. Falgold, Hwange and RioZim traded at 1c, 2.35c and 55c with 15,000, 6,781 and 68 shares exchanging hands respectively. The resources sector closed unchanged at 69.63 while turnover came in at $1,458,021

Econet, as has become the norm over the past weeks carried the day with 1,555,356 shares exchanging hands at 36.50c (+0.5c). Lafarge also joined the party, the French headquartered cement producer added 0.05c to trade at 40c with 1,581,764 shares changing hands. Lafarge, chief executive officer, Amil Tantawi yesterday highlighted how the firm’s revenue was down 15% as at March 2017 mainly due to the incessant rains season that weighed down demand for their product.

She however added that the cement producer’s revenues have been on the rebound since April with demand expected to increase in the second quarter.

Axia reversed yesterday’s losses and traded 0.10c in the green at 8.70c with 109,031 changing hands. Bankers, Barclays and CBZ traded flat at 3.40c and 9.54c with 118,000 and 1,972 shares changing hands respectively. While FBC added 1c to close at 13c with 5,960 shares changing hands. Fidelity traded flat at 11.50c with 939,871 shares changing hands.

CFI continued to march in the positive, the Agro concern notched up 1.13c to trade at 14.18c with 69,304 shares changing hands. The counter closed higher at 14.25c with increased demand. Colcom traded 2c firmer at 40c with 3,546 shares changing hands. The meat processer is set to be delisted from the ZSE. Delta traded 0.63c firmer at 100.65c with 11,270 shares exchanging hands. The counter closed lower at 101c.

Hippo added 0.25c to close at 55.50c with 171,438 shares changing hands. Meikles traded 0.95c stronger at 26c with only 5000 shares exchanging hands. Old Mutual continued to rally, the Insurance giant inched up 0.43c to trade at 377.43c.

The counter closed higher at 380c on the back of increased demand for the stock. Padenga who are up 33.13% year to date added a further 0.05 to close at 21.30c with 9,592 shares changing hands. Mashonaland Holdings added 0.21c to close at 2.01c with 57,307 shares changing hands. Zimpapers traded 0.25c firmer at 1c with 63,918 shares changing hands

Although most counters recorded gains a few stocks traded in the red. Seedco reversed yesterday’s gains and lost 0.34c to close at 101c with 1,776 shares changing hands ahead of its results briefing on Thursday. Simbisa was down 0.01c at 18c with a mere 1,230 shares changing hands. Star Africa traded 0.02c weaker at 1.18c with 86,400 shares changing hands.

ZSE continues to rally as demand for blue chips increases

ZSE continues to rally as demand for blue chips increases

HARARE- The local bourse continued to perform very well on the back of elevated demand across all sectors as fund managers rebalance their portfolios towards safer investments on the market.

Econet and Seedco carried the day as demand from local investors remains firm.  Econet added 1c to trade at 36c with 3,006,099 shares changing hands and closed at 36.25c. The counter remains one of the most sought after stock on the bourse. Seedco added 0.34 shares to trade at 101.34c with 1,001,274 shares changing hands, the counter closed lower at 101c.

Demand for Agro concern, CFI has remained firm, the stock traded 1c lower at 13.05c with 6,875,493 shares changing hands. The company is on a recovery path evidenced by revenue for the  half year  ended 31 March 2017 increasing  30,1%  to  $24,9 mln compared to  $ 19,1mln in prior half year on the back of  a good 2016/7 agricultural season and good performance by horticultural and property development.

Outside of these three huge trades, activity remained elevated. Other counters to record gains were Afdis which traded 1c firmer at 61c with 15,471 shares of the bottlers exchanging hands. BATZ was 38.10c in the black at 1,703.10c with only 121 shares trading.

Delta notched up 2.02c to close at 100.02c and closed at 100.25c. Hippo inched up by 3c to close at 55.25c with a mere 79 shares changing hands. Innscor remained firm, adding 0.79c with 1,052 shares trading . OKZim traded 0.36c firmer at 7.86c with 16,850 shares changing hands and closed lower at 7.44c.

Barclays traded flat at 3.40c with 302,945 shares changing hands. On Friday 02 June Barclays Bank PLC (BBPLC) announced the sale of its majority shareholding in Barclays Bank of Zimbabwe Limited (BBZ) to FMB Capital Holdings PLC (FMBCH). Completion of this transaction is subject to regulatory approvals, and is currently expected to conclude by the end of the third quarter (Q3) 2017.

The Industrial index continued to stride in the positive, the mainstream index was up a commendable 2.40 points to close at 170.38 on the back of most counters trading in the green. Activity remains very constrained on the Minings category were only 15,000 Bindura shares exchanged hands at a flat price of 3c.

The resources sector closed flat at 69.63. Turnover was a praiseworthy $3,062,493 mainly driven by the block trades in Econet and Seedco

ZSE continues to soar as turnover breaches the psychological $1m mark

ZSE continues to soar as turnover breaches the psychological $1m mark

HARARE – Today marked the tenth consecutive week of rallying on the Zimbabwe Stock Exchange on the back of strong demand in blue chips are local investors look for a safe heaven.

Heavyweights Delta and Econet carried the day with demand from local investors on the rise as they seek refuge in the safe heaven stocks. Econet added 3c to close the week at 35c with 3,466,750 shares changing hands. Delta traded flat with 114,579 shares changing hands.

Axia notched 0.6c up to close at 8.7c with 85,010 shares trading. CBZ traded flat at 9.54c with 127,473 shares changing hands, the bankers closed at 9.50c. Hippo added 7.25c to close at 52.25c with only 1,448 shares changing hands. The counter has rallied 49.29% year to date.

Meikles added 3.5c to trade at 25c with 9,323 shares changing hands. The diversified group reported a strong set of yearend results showing a 104% growth in EBITDA to $24.8m. The performance at the EBITDA level was on account of solid results from Supermarkets, Hotels and Agriculture.

OKZim and Old Mutual both traded flat at 7.50c and 377c with 83,353 and 20,250 shares changing hands respectively. Demand for both counters remained elevated.

The Industrial Index continued to soar as demand continues to be elevated across all sectors. The mainstream index added 3.21 points to close at 167.98 on the back of strong gains in Econet and Meikles.

No change was recorded in the Minings albeit strong demand in the sector. Market turnover breached the psychological $1m mark to close the day at $1,431,500. Barclays Plc officially announces sale of stake to FMB