After a record 2017, analysts say stocks to watch this year will be in tourism, construction, retail and agriculture.
In the construction sector, Proplastic is on the spotlight given increased demand for its products and its quest to increase exports in the region coupled with the ongoing capital expansion to expand production. Other companies to watch in the construction sector include Masimba basing on its strong order book which the company believes could run through 2019.
In the agriculture sector, companies such as Seedco are expected to benefit from government’s farmer support scheme, Command Agriculture.
The retail sector will continue to benefit from the high prices, but any government crackdown on price increases could hit the sector hard. Companies to watch include OK Zimbabwe and Meikles which part owns the Pick n Pay chain of supermarkets.
In tourism African Sun is expected to benefit from the anticipated increase in arrivals this year. Analysts, however warn that equities in Zimbabwe are still overvalued, as such there might be no significant share price increases in the short to medium term given the anticipated political and economic reforms under the new dispensation.
Top performers in 2017
A penny stock, General Beltings (GB), Zimbabwe’s sole manufacturer of conveyor belts was the top gainer in the year after picking up 900 percent in the year to close at 0.8 cents. The company is valued at $4.3 million. In six months to June GB narrowed its net loss by nearly a third to $254 230 from $360 380 in the prior comparable period, chiefly due to lower operating expenses. The company saw its capacity utilisation growing to 40 percent in July last year from 11 percent in the first half of 2016, as a government ban on imports spurred volumes. However, cheaper imports which are smuggled into the country continue to threaten the business. Delays in foreign currency payments for imports of raw materials as well as servicing legacy and current debts continue to weigh on its operations.
ZB FINANCIAL HOLDINGS
ZB Financial Holdings gained 696 percent in the year to close at 36 cents. Currently the company is valued at $63.07 million. In the six months to June last year, ZB Holdings reported a 38 percent increase in net profit from to $8.2 million from $5.9 million in the comparable period in the previous year on increased transaction volumes and improved net insurance premiums . The banking unit expects non interest income to spur total income due to a surge in the use of plastic money. Upgrade of the core banking platform is underway whilst the supporting infrastructure has been scaled up. Additionally, the Group has also invested in a further 3 000 Point of Sale machines in order to boost its non interest income in a cashlite economy. The company was removed from the sanction list in October 2016, a development which is expected to provide a boon to the group.
Packaging group Nampak advanced 650 percent in the year to close at 18 cents. Its market capitalisation stood at $136.02 million. The company recorded a 13.5 percent growth in net income for the year to September 30 to $4.9 million from $4.3 million in 2016. The company is poised to further improve performance across the board in an environment of growing competition and greater regulatory requirements. The group focuses on delivering more operational improvements, most particularly at Glass and at Nampak Plastics Europe.
The agro-industrial group, CFI advanced 626 percent in the year to close at 70.75 cents . The company is valued at $75.02 million. CFI reported an impressive performance after significantly narrowing its after tax loss to $272 784 in the six months to March 31 from $6.1 million loss incurred in the prior half year, supported by the improved performance of its Farm and City unit. Analysts say despite being choked by high levels of debt, the agro industrial concern still holds a great potential supported by its strategic business units across the agriculture value chain. It has three divisions in poultry, retail and light manufacturing and property, all potential gold mines once the economy is on the recovery path. The group will also continue to unlock value opportunities from the existing land banks with identified development partners. However the agro industrial group is currently under suspension from trading in shares on the Zimbabwe Stock Exchange (ZSE) on corporate governance matters, following a dramatic major shareholder war, which saw a number of top directors leaving the group.
Hippo Valley Estates advanced 403 percent in the year to close at 176 cents. Currently Hippo is valued at $339.72 million. Its net profit rose four-fold to $5.6 million in the six months to September from 1.4 million in the comparable period in 2016. This was despite a 12.6 percent decline in revenue to $72.4 million compared to $82.9 million in the comparable period in 2016 due to late start to the season. The company continues to leverage on its asset base ,benefitting from synergies within Tongaat Hulett. Additionally, the current dam levels following the good rains at the end of 2016 into 2017 are providing full irrigation during 2017 /18, leading to significant crop recovery by 2018/19.
Ariston advanced 386 percent in the year to close at 1.7 cents. The company is valued at $27.44 million. In the six months to March, Ariston narrowed its loss position to $1.99 million from $2.14 million in the comparable period in 2016. The company envisages higher yields than the prior year, on the back of firmer prices and adequate export orders, especially for its high grade macadamia nuts.
First Mutual Limited (FML) advanced 364 percent in the year to close at 19.5 cents. The insurance company is valued at $134.58 million. The group reported a 63 percent increase in after tax profit in the six months to June to $4.3 million from $2.6 million in the same period in 2016 driven by high returns from investment securities. In December last year the group got approvals to acquire Zimbabwe’s largest short term insurer, NicozDiamond, a strategic move to expand its business. The transaction will see FML increasing its holding in NicozDiamond to 80.92 percent, and as a result, NicozDiamond will become a subsidiary of FML. Additionally, the company has indicated that it will delist NicozDiamond once the transaction is completed. This will see operations of NicozDiamond and FML’s Tristar Insurance Company being merged to form a giant short term insurer, a move which analysts say will boost FML on synergies.
Civil engineering group Masimba Holdings advanced 323 percent in the year to close at 7.2 cents . The group is currently valued at $16.71 million. The group recorded a 23 percent increase in after tax profit to $137 422 in the half year to June from $111 477 in the comparable period in 2016 on improved revenue coupled with overhead efficiencies. Revenue was largely driven by a firm order book. Going forward, the company aims to improve its bottom line, leveraging on an active order book of $38.4 million, with infrastructure projects contributing $16.8 million (44 percent).
African Sun advanced 300 percent in the year to close at 4.8 cents. The company is valued at $41.37 million. The company overturned a half year 2016 loss position of $560 000 to a net profit of $190,000 in 2017 attributable to growth in revenue and cost containments measures. Revenue was generally buoyed by an 8 percent increase in occupancy levels at the group’s properties. The company banks on the completion of the Victoria Falls Airport expansion and refurbishment project, which is expected to increase foreign arrivals and improve occupancy at its Victoria Falls properties.
Riozim advanced 300 percent in the year to close at 120 cents . Its market capitalisation stood at $146.44 million. The miner’s after tax profit for the half year ended June 30, 2017 stood at $2.9 million compared to a loss position of $403 000 in the same period last year largely driven by improved revenues. Going forward, the focus of the Group shall be on intensifying investment in further exploration and development in order to increase production, create more reserves and achieve sustainable profitability. The complete installation of a flotation section at Cam and Motor Mine will enhance recovery of gold from sulphide ores. Cam and Motor Mine will also pursue other metallurgical processes to recover gold from waste material. The Dalny Mine, which the group purchased from Falcon, is expected to enhance production. The Group’s efforts will also seek to contain costs across all operations in line with the goal of generating positive cash flows.