The Sunday Mail
Enacy Mapakame
Business Reporter
SINCE share prices on the Zimbabwe Stock Exchange (ZSE) began to adjust to the multi-currency system introduced in 2009, it has been good being a stock-market investor, particularly in the favoured large capitalised blue-chip companies.
In just three years, returns in beloved stocks such as BAT Ltd, Delta Corporation, Innscor Africa Holdings Ltd, Econet Wireless Zimbabwe, OK Zimbabwe Ltd and Hippo Valley Ltd spiked above 100 percent and in some cases 300 percent as profits grew rapidly.
But times are changing. With traditional market favourites hit by weak consumer demand and limited growth prospects, investors have turned to second-liner and penny stocks, where there are chances of better returns.
Indeed, more than a dozen mid-tier stocks have this year bucked the stock-market rout, which has battered several blue chips to record lows.
As of last week, just 17 of the 58 tradable stocks on the ZSE had traded positively in 2015. All of them except banking group Barclays and tobacco processor BAT Ltd, are widely considered middle or light weight.
Equities analyst Mr Albert Norumedzo said there is more potential for upward movement and limited downward risk within mid-tier stocks.
The opposite is true for big capitalised counters.“It is easier for a stock with a share price of US2c or US5c to climb upwards to reach US10c but it is different with big cap counters whose share prices are already high. They have the potential to go down,” he said by telephone.
Life assurer, Fidelity Life Holdings Ltd, is building a ‘safe haven’ property portfolio that carries with it the promise of a company that can pay dividends and grow earnings reliably in the future, experts say.
Investors are typically drawn to such stocks. For this reason, shares of Fidelity Life have climbed 50 percent year-to-date to US12c.
Much of this growth occurred last month after the company concluded plans to takeover CFI Holdings Ltd’s US$18 million debt in exchange for an 834-hectare farm in Harare.
Harare brokerage firm, Lynton Edwards Stockbrokers (LES), said the growth at Fidelity Life Ltd had been driven by corporate actions that stimulate growth.
Fidelity Life plans to develop residential stands at the Langford Estate, a development that officials say will boost the balance sheet to US$500 million within the next few years.
This could push the life assurer to blue-chip status within a few years, the same reason that has pulled investors to the current big names on the stock market, experts say.
Over the past 52 weeks, Fidelity Life shares have reached a high of US12c and a low of US4,5c.
Mr Norumedzo said Fidelity Life growth will be defined more by its net asset value – the difference between assets and liabilities – than the size of its land bank
“Such stocks will be limited by their net asset value, which is a benchmark that investor’s look at,” he said.
“The big name counters, particularly consumers stocks, should brace for a further freefall in the absence of any catalysts to stimulate economic growth.”
Most investors had something to smile about this year and shares with key interests in property and insurance have recorded reliable growth in earnings and dividends, making them a darling with those keen to escape the wobbly blue chip companies.
Commercial property group, Dawn Properties has soared 68 percent to 1,76c.
Since unbundling from hotel group, African Sun Ltd in 2003 and subsequent listing as a separate entity, Dawn Properties, which owns several top hotels, has benefited from the inflation-hedging characteristics of the property sector, according to analysts.
The stock has climbed from a low of US0,8c in the past year.
However, majority shareholders, Brainworks Capital Management, recently offered to buy out minorities at premium US2c per share.
If successful, the offer will force Dawn Properties to delist from the ZSE.
On a year-to-date basis, reinsurer Zimre Holdings Ltd is up 44 percent to US1,23c while short-term insurer NicozDiamond has climbed 39 percent to US1,8c.
The biggest mover so far this year has been industrial conglomerate, Art Corporation. The manufacturer of stationery, tissues and automobile batteries has jumped 133 percent to 0,70c; doubling its market value to US$3,02 million.
Just two years ago,
Art Corporation was on the brink of failure, with current liabilities in excess of current assets, but thanks to a multi-million dollar cash injection by Korean group, Taesung Chemical Co, the firm has now narrowed losses to US$114,000 during the half year to March 2015 from a net loss of US$1 million in the comparable period a year ago. Taesung Chemical owns 55 percent of Art Corporation.
Barclays Zimbabwe Ltd and CFI Holdings Ltd are among this year’s biggest gains, up 69 percent and 63 percent, respectively.
“There are growth prospects for mid-tiers but it may be difficult to grow into big cap counters. Fidelity has great potential but we doubt the likes of Art may reach that level.
“They are in an industry that is difficult for them to control over 90 percent market share, anyone can start stationery business,” said stockbrokers, LES.
For years, the ZSE’s 10 most capitalised companies – accounting 85 percent of the bourse’s total US$3,17 billion market capitalisation – have enjoyed the fruits of their dominant market positions, treating shareholders to consistent generous dividend payouts.
But several factors including poor consumer spend and a harsh economy have combined to bring misery to the market leaders, forcing investors to dump blue-chip shares.
In the post-2009 period, for instance, the country’s largest telecommunications firm, Econet Wireless Zimbabwe, enjoyed a boom during a high tariff cellular phone use revolution that pushed penetration rates beyond 100 percent, and broad band above 5,2 million users.
But profits at Econet Wireless Zimbabwe have started to fall due to declining voice revenue – the traditional cashcow – as subscribers switch to free online-based calling and messaging services like WhatsApp.
Since 2012, net profit has tumbled by half to US$70 million during the year to February 2015.
This year, Econet Wireless Zimbabwe shares have declined 70 percent to US18c. The stock is down from a 12-month high of US60c.
At some point, shares of Econet Wireless Zimbabwe spiraled to a record high US$7 before a 10 for one share split in 2013 cut the price to US70c. Econet shareholders have lost over US$100 million of value in 2015.
At peerless beverage maker, Delta Corporation, price cuts of up to 20 percent in the past year meant to boost sales have failed to cheer investors’ confidence.
Delta enjoys a virtual monopoly, with 97 percent share of the soft drinks market, 96 percent lager beer and 90 percent of the traditional beer market.
Since January, the stock has crashed 26 percent to US75c in line with the carnage in other heavyweight counters.
Innscor Africa Holdings Ltd and Pretoria Portland Cement have each tanked 43 percent while Meikles is down 41 percent.
Shares of supermarket chain, OK Zimbaabwe Ltd, which earlier this month reported a half-year to September 2015 net profit plunge of 72 percent to US$1,2 million, have fallen 57 percent to a year-low of US5c. The share reached a high of US14c in the past 52 weeks.
Year-to-date; Hippo Valley, National Foods Ltd, Old Mutual Ltd and SeedCo Ltd have dropped 29 percent, 19 percent, 7,5 percent and 2,1 percent in that order.
Of the market favourites, only BAT Ltd has traded positively, up 8 percent while banking group, CBZ Holdings Ltd, has remained flat at US10c.
Equities have extended losses from 2014 when they tumbled 33 percent. After close of business on Monday, industrials were down 27 percent year-to-date to 118,79 points, the lowest since May 2009.
Minings have this year skid nearly 70 percent to 22,33 points. All the four mining stocks have seen red due to the slowdown in the Chinese economy, a consumer of half the world’s metal output.
Bindura Nickel Corporation Ltd has crashed 80 percent to US1,30c and Falgold is 86 percent down to US0,50c. Hwange Colliery Company Ltd and RioZim Ltd have declined 30 percent each.
