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Research Reports

Zimbabwe Equity Strategy 2013 Cautiously optimistic
Elections present a potential catalyst as economic growth moderates to SSA levels In our view, intended elections in CY13 present a potential catalyst for positive policy shifts in the country that can stimulate higher and sustained growth in the future, whilst improving foreign investor sentiment. Prior year (CY12) showed a downward trend in economic growth sharply diverging from the aggressive GDP growth rates achieved between CY09 to CY11 (average 7.7% pa) off a low economic base in CY08.The original GDP growth forecast of 9.4% for CY12 was twice downgraded by the MoF during the year to a final forecast of 4.4%.

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Seedco FY13 Trading Update: Deteriorating fundamentals 06-03-2013
Worse than anticipated performance signalled in trading update Seedco released a Trading Update last week pointing to a worse than anticipated decline in volumes. The company stated that management now anticipate lower profits in FY13 than those reported last year, with a disappointing season in Zimbabwe driving profits lower.

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CBZ Holdings FY12: Prudent credit growth, improving liquidity 06-03-13
Solid core capital base attracting improved offshore credit lines CBZ remained the only Zimbabwean bank to be fully compliant with the central bank’s FY14 minimum capital target of $100mn. Holding core capital of $117.9mn at bank level, the bank saw a 46% increase in on balance sheet lines of credit to $180mn, with an additional $100mn sitting off balance sheet ($280mn total in off shore lines of credit).

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Econet 1H13 Earnings Update

Econet Wireless released a mixed set of results for the half year ended 31 August 2012. As expected, subscribers were up 24% year on year to 7.02mn. ARPU’s declined in line with expectations, down 3.07% in that period at $8.43, slightly lower than our $8.45 forecast for the year. Revenues consequently rose 16.7% to $339mn.

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Truworths FY12 Earnings Update: Below expectations 05-10-2012

Truworths results for the full year ended 8 July 2012 came in below expectations. Revenues declined 2.63% as Truworths and Topic’s revenues fell 4.2% and 4.1% respectively. The Number 1 Stores, however, saw an increase in revenues, with turnover rising 16.7% against the previous year. At 2.89% below our forecasts, revenue was largely in line with expectations after a disappointing 1H12 in which revenues fell 9%. Gross margins declined from 51.7% in FY11 to 50.7% in FY12, on the back of further erosion of gross margins related to loyalty discounts in the second half.

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IH Stock Picks October 2012- Staying Defensive

In this brief update we review the macro-economic picture for Zimbabwe in 1H12 with a specific focus on the equities market and present our thoughts for the remainder of the year given the revision of national GDP forecasts in the Mid-Term Fiscal Policy Review. This year’s reporting season has clearly shown that momentum lies with consumer names with strong cash generative abilities, notably Delta FY12 revenue up 36%, Innscor FY12 revenue up 21% and OK Zimbabwe FY12 revenue up 60%. Going forward it is clear that given downward revision in GDP growth (9.4% to 5.6%), we can expect a deceleration in the growth of consumer incomes, whilst the onset of a below expectation agricultural season seems likely to impose liquidity restrictions at the bottom of the pyramid. However despite these factors, we maintain our belief that select names in the consumer space remain defensive, whilst presenting a BUY opportunity on attractive valuations versus comparables. In our view, names that have been quick to respond to capex needs, restructuring of product portfolios to maximise margin and stringent cost chain management will see continued growth in profitability despite slower top line growth.

[Download Full Report ] 766 kb

Innscor FY12 Earnings Update; Unlocking Efficiencies

Innscor, improving margin performance Innscor turned in a solid set of FY12 numbers showing continued top line growth against declining GDP estimates and constrained liquidity in the economy. Revenue rose 21% y-o-y to $627mn, just 0.28% below our estimate of $628mn, anchored yet again by a pleasing performance in Bakeries and Fast Foods. Margin growth for the group out performed our expectation, with an FY12 operating margin of 9.1% being achieved versus our estimate of 8.3%; this resulted in the group posting EBITDA of $68.5mn, 44% ahead of FY11 and 5.68% above our forecast of $64.8mn. Net attributable income for FY12 of $37.9mn was achieved, 45% above FY11 and 7.5% above our forecast of $35.3mn. Basic earnings per share (including the profit on disposal of Natfoods) came in at US7.15c per share versus our forecast of US6.53c. Innscor maintained its strong cash generative abilities, generating $48.8mn in cash from operating activities, translating to a cash to EBITDA ratio of 71%. The company declared a final dividend of US1c payable on 5 October 2012, bringing the total dividend for the year to US1.75c.

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Lafarge 1H12 Laying the recovery

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Pearl Properties 1H12 Earnings Update

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Hippo Valley Research Report_Aug 2012

Demand still driving growth Delta Corporation released a promising set of 1H12 numbers displaying continued growth momentum in volumes. Aggregate volumes increased 23% H-O-H to 3.247mn hl.

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Lafarge Cement; Reconstructing margins

AICO Africa released a strong set of results for the year ended March 2011. Group revenues rose 41% to $210mn, 4% higher than our forecasts, on the back of higher volumes and prices in the Cotton and Seed businesses. Cottco saw its revenues rise 38% to $210mn; Seed sales rose 27% to $97.8mn; FMCG and Spinning saw increases in revenues of 23% and 6% respectively. Total group volumes declined 2% to 190k due to stagnation in the FMCG business and low carryover stocks in the Cotton business.

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OK Zimbabwe FY12 Earnings Update

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Seedco FY12 Earnings Update

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Mid-Term Fiscal Policy Statement 23.07.12

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Effect of the Weakening Rand on Zimbabwe

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Seedco FY12 Earnings: Yielding mixed results

SeedCo released an impressive set of results for the full year ended 31 March 2011. High commodity prices led to strong growth in demand and volumes, resulting in a 27% increase in revenue to $97.8mn, 16% higher than our forecast of $84mn.

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Delta Corporation F12 Earnings: The beginning of a new era 15-05-2012

Demand still driving growth Delta Corporation released a promising set of 1H12 numbers displaying continued growth momentum in volumes. Aggregate volumes increased 23% H-O-H to 3.247mn hl.

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Econet FY12 Earnings: Continued top-line growth 03 05 2012

Strong results largely in line with expectations Econet Wireless Zimbabwe Ltd released results for the year ended 29 February 2012 which showed continued growth across the board. Total revenue of $611.1mn was achieved, representing a 24% increase from the previous year, albeit 5% lower than our FY12 revenue forecast of $642.8mn.

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Dairibord Zimbabwe- An encouraging recovery 01-03-2012

Dairibord, rebounding marginsDairibord Holdings overcame a below expectation 1H11 performance to produce a fair set of FY11 results reflecting sustained y-o-y growth by the dairy producer. Revenue for FY11 rose 28% to $96mn, 5% below our forecast of $101mn.

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Zimbabwe Equity Strategy 09-02-12

Sustained economic growth amidst global fragilityDespite the general global economic slowdown, Zimbabwe continued to experience sustained economic growth in CY11 with GDP rising 9.3%, after recording 8.1% growth in CY10. Mining and agriculture remained the mainstays of the economy in CY11, with growth rates of 25.8% and 7.4% respectively. Inflation did, however, exceed the CY11 target of 4.5%, closing the year at 4.9% driven by increases in housing and alcohol. The Ministry of Finance forecasts GDP growth of 9.4% in CY12; this is compared to growth forecasts of 5.5% for SSA and 3.3% for the global economy by the IMF. Local agriculture is expected to grow 11.6% led by increased output in tobacco, maize and cotton; whilst mining is expected to grow 15.9% benefitting from firming commodity prices and increased output from gold, coal and platinum. Revenues (tax or non-tax) are expected to rise to $4bn in CY12 (vs $2.8bn CY11) driven by an injection of $600mn from diamond sales following the Kimberley Process Certification Scheme’s compromise allowing sale of the Marange Diamonds. Recurrent expenditure will however remain a key area of concern accounting for 80% of budgeted spending in 2012.

[Download Full Report ] 1129 kb

Delta Corporation 1H12 Earnings: Maintaining Momentum 10-11-2011

Demand still driving growth Delta Corporation released a promising set of 1H12 numbers displaying continued growth momentum in volumes. Aggregate volumes increased 23% H-O-H to 3.247mn hl.

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National Foods Research Report; Grinding out returns... 24-10-2011

Diverse FMCG conglomerate with significant capacity National Foods Holdings Limited is a diversified conglomerate, involved in the manufacture and distribution of basic food commodities (maize meal, flour and cooking oil), stock feeds, as well as branded FMCG products. The company has an extensive manufacturing, depot and distribution network across the country. Capacity in the Maize milling, Flour Milling, FMCG and Stock Feeds businesses are at 600,000 tons, 264,000 tons, 58,800 tons and 480,000 tons respectively. An extensive distribution network of 22 depots allows National Foods higher penetration into the more remote areas of the country and facilitates the delivery of products into such areas at lower costs.

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Econet 1H12 Earnings Update: Valuation Disconnect 05 10 2011

Econet released a set of interim results for the 6 months ended 31 August largely in line with our expectations. Revenues rose 23.5% to $291mn in the period under review, on the back of 22.9% h-o-h increase in the subscriber base to 5.64mn (total market penetration at 66%).

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OK Zimbabwe Q1 Update: Outperforming Expectations 01-08-2011

After releasing an impressive set of results for the full year ended 31 March 2011, OK Zimbabwe continues to outperform expectations, with an update on Q1 showing that the company continues to see aggressive top-line growth. Revenue for Q1 is up 46.5% to $82mn in OK stores excluding OK Mart.

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Delta Corporation Trading Update: Still beating the odds 28-07-2011

Delta Corporation released a promising trading update in its Annual General Meeting held yesterday, revealing higher than expected volumes growth for 1Q12. Aggregate volumes increased 27% Q-O-Q, from 1.32mn hl achieved in 1Q11 to 1.67mn hl achieved in 1Q12, this marks the company’s strongest quarter since dollarization in 2008 (total volume FY11 was 5.78mn hl).

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Mid-Term Fiscal Policy Statement 26-07-2011

Minister of Finance (MoF), Tendai Biti, yesterday announced the Mid Term Fiscal Policy, reviewing economic performance for the first half of the year and providing an outlook for the second half of 2011. The policy statement highlighted that the country remains on a significant growth trajectory, and is expected to meet economic and fiscal targets set at the beginning of the year. The country is expected to register growth of 9.3%, up from 8.1% in line with the 2011 Budget.

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AICO Africa Company Note: Cottoning on to a recovery 13-07-2011

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Meikles Limited FY11 Earnings: Depressed margins despite solid top-line growth 28-06-2011

Meikles Limited released a set of results that showed significant top-line growth, in line with expectations. Revenue for the 15 months to 31 March came in at $330mn, up from $148mn for the 12 Months to 31 December 2010, and 1.8% lower than our forecasts.

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Seedco FY11 Earnings: Strong demand bolsters topline and profitability 23-06-2011

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OK Zimbabwe FY11 Earnings: Outperforming expectations 08-06-11

OK Zimbabwe released an impressive set of results for the full year ended 31 March 2010 on the back of a strong second half performance. Revenue was up 37% y-o-y to $257mn, outperforming our $252.7mn forecast on the back of a 46.7% increase in sales per square meter, from $2,694 in FY10 to $3,952 in FY11. Gross margins improved 0.8% y-o-y to 16.9% in FY11 on the back of decreased shrinkage, improved procurement and increasing demand for higher margin goods. Shrinkage declined 42% to $2.2mn, receding from 2.03% of sales in FY10 to 0.85% in FY11.

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Innscor Africa: The quintessential consumer play 02-06-2011

Innscor Africa’s 1H11 results for the 6 months ended 31 December reflected continued revenue and volume growth across the diversified business. Profitability improved as evidenced by higher margins achieved, The EBITDA margin increased from 9% to 10% h-o-h, whilst the PBT margin increased from 8% to 9% h-o-h; due to both revenue growth and improved conversion efficiencies.

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Delta Corporation F2011 Earnings: Growth in line with our expectations 12-05-2011

Delta Corporation posted a solid set of FY11 earnings in their second full financial year post dollarisation. The company reported gross revenue of $481mn, 3% above our forecast of $465mn.

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Econet Company Note 21 04 2011

Econet Wireless Zimbabwe Ltd released a sturdy set of earnings for the year ended 28 February 2011. Total revenue reported was $493.5mn, an increase of 36% against prior year and a marginal 2% below our forecasted FY11 revenue of $503.3mn. FY11 EBITDA came in at $242.7mn, 35% ahead of FY10 and 2% below our forecast of $246.6mn.

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CBZ Holdings FY10 Earnings: In line with our expectations 04-04-11

CBZ Holdings group released a robust set of earnings for the year ended 31 December 2010. Net income reported was $17.6mn, an improvement of 115% against prior year and a marginal 5% above our forecasted net income of $16.7mn.

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Pearl Properties FY10 Earnings: Reaffirming our high conviction 31-03-11

Pearl Properties released an impressive set of results for the full year ended 31 December 2010. Rental income during the period outperformed our $6.2mn forecast and rose 67% (y-o-y) to $7.0mn on the back of an 84% rise in rentals per square meter to $5.59 in the period under review.

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Zimbabwe Equity Strategy 09-02-12

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Zimbabwe Monetary Policy Statement: Reaffirming our bullish macro outlook 31-01-11

The Reserve Bank of Zimbabwe (RBZ) on Friday (28 Jan) released its biannual Monetary Policy Statement. The Statement affirms that the economy remains on the recovery path with most sectors of the economy continuing to register positive growth.

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Econet Wireless: Data the New Frontier 18-01-11

We initiate coverage of Econet Wireless, Zimbabwe’s largest mobile operator, with over 4.5mn subscribers. We forecast revenue growth of 38.7% to 503.3mn for 2011E, with EBITDA margins of 49% resulting in EBITDA of $246.6mn. We forecast net income of $141.3mn for 2011E. Using a weighted combined multiples valuation method (PER & EV/EBITDA), we have arrived at a target price of $6.91 for Econet Wireless, implying upside of 40%. We therefore initiate our coverage of Econet Wireless Holdings with a Buy recommendation.

[Download Full Report ] 653 kb

IH Zimbabwe 2010-2011 Budget Highlights 26-11-10

The Minister of Finance (MoF) yesterday (25 Nov) released the National 2011 budget, which served to highlight the continued macro-economic recovery witnessed since the dollarization of the economy in Feb 09. GDP growth for 2010 is expected to be 8.1% from 5.7% in 2009. This is expected to be the case amidst a low inflation environment, with latest Y-o-Y inflation (Oct 10) at 3.6%. MoF expects Y-o-Y inflation to trend to 4.8% by end of the year. GDP growth in 2010 was centered on two key pillars of the economy, agriculture (+33.9%), and mining (+47%), which also benefitted from higher global commodity prices.

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Monthly Snapshots

February Monthly Snapshot 2013
Market Performance Following a strong performance in January, the market flattened out in February with the total market capitalization rising a marginal 2.64% to close the month at $5.30bn (+20.91% YTD). The Industrial Index also registered a modest gain, up 1.84%, amidst mixed movement in heavyweights; Econet (ECWH: ZH) rose a significant 26.79% while Delta (DELTA: ZH) lost 12.71% and Innscor (INAF: ZH) gained 2.74%. Mid-caps OK Zimbabwe (OKZIMBAB: ZH), BAT (BAT: ZH) and Dairibord (DZLH: ZH) performed well, rising 18.61%, 45.00% and 26.09% respectively, while Seedco (SEEDCO: ZH) fell 19.48%. The Mining Index declined 14.35% with weakness in Bindura (BINDURA: ZH), Falgold (FALGOLD: ZH) and Hwange (HWANGE: ZH), down 19.35%, 18.75% and 17.95% respectively. The top gainers of the month were GB Holdings (GENL: ZH), up 100.00%, Trust (TRUST: ZH), up 100.00%, and TSL (TSL: ZH), up 48.00%. The largest losses were in MedTech (MEDTECH: ZH), Lifestyle and Zimplow (ZIMPLOW: ZH), falling 75.00%, 50.00% and 48.33% respectively.

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September Monthly Snapshot 2012

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August Monthly Snapshot 2012

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