Simbisa forecast to see revenue growth

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LEADING equities research firm, IH Securities has forecast Simbisa Holdings revenues to grow driven largely by footprint expansion, customer count recovery post-pandemic and elevated average spend in line with growth of the Zimbabwean and regional economies.

Simbisa is a quick-service restaurant business (QSR) listed on the Victoria Falls Stock Exchange (VFEX), having migrated its shares from the Zimbabwe Stock Exchange.

“We forecast revenue will increase by 25 percent in the 2023 financial year to circa US$290 million. We believe the cost containment measures adopted during the Covid-19 pandemic can be sustained moving forward,” IH said in a research note on Simbisa.

According to IH, the business continues to pursue its growth strategy hinged on improved deliveries, technology development, continued growth in footprint and brand development.

In Kenya, with a store count of 224, Simbisa consolidated its position as the largest QSR operator in the market surpassing the previous milestone of 200 stores.

The group has a significant pipeline of new stores and expects to open 83 stores in the financial year 2023, mainly in Zimbabwe (41) and Kenya (41) at a cost of about US$27 million.

“Simbisa is generating sufficiently strong free cash flows to drive this growth. As such, we expect an increase in customer counts, from a low base, on the back of improved trading hours and increased store count, translating to increased revenue,” IH said.

The research firm highlighted that with the easing of trading restrictions in the group’s operating markets, trading capacity has scaled up, and with that, customer counts have shown a recovery.

IH said a substantial investment pipeline, with 180 potential projects identified over the next two financial years, will drive growth and unlock shareholder value.

The group’s primary growth markets will be Kenya and Zimbabwe in the short to medium term, however, the Group remains vigilant of new growth opportunities in existing and potential new markets and continues exploring business development options.

According to IH, in Zimbabwe, Simbisa customer count has been increasing at an average rate of circa 8,2 percent over the past few years despite headwinds emanating from the Covid-19 pandemic and economic pressures in the country.

In FY22, customer count increased from 28 million in FY21 to over 36 million. On other hand, customer count in the regional business has been increasing at a faster rate, averaging about 20 percent growth year on year, again defying the unfavourable operating environment posed by the pandemic among other challenges.

“Inferring from these historical numbers and taking into account the expected uptick in capacity utilisation post-pandemic, we forecast Zimbabwe customer count to increase at a rate of 8,2 percent over the next 5 years.

“We believe our forecasts are more on the conservative side considering the Group is looking forward to rollout about 87 new stores in FY23 alone,” IH said.

According to IH, Zimbabwe’s gross domestic product (GDP) for the year 2023 is expected to increase by 3,8 percent underpinned by favourable international commodity prices, normal to above normal rainfall, and continued use of the multi-currency regime. IH said inferring from fundamentals, it believes that there are signals of improving bottom of the pyramid liquidity for the consumer in 2023 that will drive volumes.