THE Zimbabwe Stock Exchange continued its upward trend. With the announcement of the official inflation figure at 300,1%, there is no turning back for the equities market. Any investor
with an inkling of capital preservation now practically has one investment vehicle choice, namely equities.
During the week under review, 53 counters advanced, 15 counters retreated and 11 counters remained static.
The industrial index ended the week at a new high of 269 896,3 points. The main index was buoyed by gains in counters such as Bindura which appreciated by 131% from $260 to $600 and Mashonaland Holdings Ltd which increased from $7,50 to $16,00.
Tanganda, Cottco and Cafca also recorded similar appreciations in share price. Other counters such as Edgars, softened somewhat from the $100 levels to $86 by close of trading last Friday.
Zimnat which had been rallying strongly to peak at $4,90 lost a few points to close at $3,80.
The market’s response to Apex’s results was lukewarm and the counter proceeded to shed 5 000c to close at $350.
Going forward, we do not see the market easing in the foreseeable future. Thus the 300 000 point mark should be achieved in the following weeks.
The results reporting period for June year-end and December interims should supply the market with the additional momentum to keep it running.
In light of this, we advise investors not to remain on the sidelines, waiting for the market to come off, but to take positions in order to avoid the usual “should have, could have,would have” blues.
At the beginning of the week, stock markets in the United States fell generally as a result of profit-taking.
This was ahead of the US Federal Reserve’s meeting which was held from June 24 to 25.
On the Tokyo Stock Exchange, the Nikkei 225 lost 2,38% at the beginning of the week as investor sentiment was dampened by losses recorded on Wall Street.
However, in Europe, major markets opened the week mixed.
In the US the fall continued unabated as the Federal Reserve proceeded to cut interest rates by a quarter of a percentage point and issued a lukewarm statement on the current state of the US economy.
Tokyo lost some ground in sympathy and the Nikkei 225 closed 0,1% lower on Wednesday.
By the end of the week, all major markets still had not regained their losses. The S&P 500 lost 0,9% to close at 985,82, and the Nasdaq lost 1,1% to close at 1634,01
International commodity prices
There has been growth in this division.
To further enhance the distribution system, Celsys recently signed an additional contract with Edgars to sell handsets through Express Stores.
The most exciting aspect of this development is that Celsys will be supplying its own credit through these outlets which will result in higher margins.
Handset sales through both the credit model and the cash model are on the increase and margins have improved as a result of Celsys having greater access to funding. Celsys has also maintained a tight rein on costs to further lift pressure off margins.
Growth in this division has been spurred by growth in volumes owing to orders placed by major networks in Zimbabwe and several promising orders regionally.
The company is now printing cheques for three additional commercial banks and demand remains firm from large corporates seeking personalised cheques. This division has shown good profit growth, increasing by 1 700% in profitability since Celsys acquired it in 2002.
This is a new division which is already showing great promise. Essentially this is a payphone project which will be located in the semi-urban and rural areas. Market research has already established huge pent-up demand for this product. Celsys will derive earnings from this product from the initial sale of the payphone and airtime commissions every month based on the airtime revenue of each payphone.
Recommendation and valuation
With forecast earnings expected to be in excess of $4,50, Celsys will be trading on an undemanding P/E of 6,1x. We recommend that investors take positions on this counter ahead of the release of the company’s results.
l This document was prepared by Barnfords Securities (Pvt) Ltd on behalf of the Royal Bank of Zimbabwe Ltd (Royal). Barnfords has based this document on information obtained from sources it believes to be reliable but which it has not independently verified. Barnfords makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of its content. Expressions of opinion are those of the research department of Barnfords only and are subject to change without notice.