Small counters on the Zimbabwe Stock Exchange (ZSE) have been performing well despite the loss of $6 billion in shareholder value since the military intervention in November last year to halt the deteriorating economic, political and social conditions.
BY TATIRA ZWINOIRA
On the last day of trading on the ZSE in January, counters that had double digit growth in their individual year to date market cap were TSL Limited, Meikles Limited, CAFCA and Edgars Stores Limited.
Stockbrokers Association of Zimbabwe vice-chairperson Arnold Dhlamini told this paper last week that the growth of these counters was necessitated by the fact that the new dispensation was focusing more on agro-related development, mining and exports.
“You find that usually the first ones to run are the big stocks as they are the centre of the indices but the other ones are now your value counters as people now go to the next layer because there may have been a big push in the other ones (big counters) previously,” he said.
“There may be sentiments of over valuation on some of the big stocks, so with the next layer, most of it was ignored most of the times so you find that the next comfort zone will be the next layer. It is usually the growth and value stocks that are chosen from that mid cap section. But, again, it is an issue of aligning to the new dispensation.”
Agro-based company TSL Limited was the highest performer among the small counters growing by 22,1% year to date as the company performs better aided by government’s economic thrust towards agriculture.
As such, demand for TSL stock has risen over perceived gains the company will make in the future.
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“… it is pretty much also aligning itself to the new dispensation where there is more thrust in agriculture. TSL is an agro-based company.
There is also more thrust in exports and TSL is in exports as well,” Dhlamini said.
On Thursday, TSL reported a 74,74% increase in profit after tax to $4,84 million for the financial year ending October 31 2017.
This also aided the company in having a net profit margin of 9,58% showing the company was in a profitable position.
“The macroeconomic environment is widely expected to improve as the new national thrust is focused on the economy. The group operates in sectors of the economy that are considered to be strategic and we therefore believe that there will be opportunities for significant growth in the medium term,” TSL said.
President Emmerson Mnangagwa is on record saying that his economic agenda was centred on agriculture.
Another counter that has also enjoyed double digits growth is Meikles Limited firming by 19,9% as of Thursday.
In Meikles’s half year report ending September 30, 2017 the company overturned its loss-making position from the comparative period in 2016 and had a positive $2,71 million in profit after tax.
Analysts attributed this to the growth of the group’s Tanganda Tea Company which experienced the largest growth in revenue of 26% to $12,9 million from $10,2 million in the comparative 2016 period compared to other portfolios under Meikles.
At the time of the report, Meikles Limited executive chairman John Moxon said the international bulk tea export prices continued to firm to average $1,65/kg in the six month’s period to September 30 2017 compared with an average of $1,51 for the same period last year.
“Bulk tea production of 3 077 tonnes was 37% higher than 2 251 tonnes produced in the comparative prior year period. The average price on avocados of $1,62/kg was 80% higher than the previous season’s average price of $0,90/kg due to significant improvement in quality as the trees mature and 629 tonnes of avocados were exported compared to 127 tonnes in the previous season,” he said.
“Macadamia nuts sales of 192 tonnes for the six months to September 2017 were 19% higher than 162 tonnes for the six months to September 2016. Average price of $4,39/kg was 57% higher than $2,80/kg realised in the previous period.”
But, just as there has been a thrust towards agriculture, so has there been towards exports.
In September 2017, Tanganda accessed the concessionary Reserve Bank of Zimbabwe’s export finance facility which assisted significantly in sourcing inputs and retiring expensive debt and placed Tanganda in a sound financial position.
As a result, Meikles net profit margin by the end of the period was also in positive territory at 1,06%.
CAFCA year to date market cap also grew by 16,7%.
In their previous results for the year ended September 30 2017, CAFCA reported a revenue increase that was complemented by a lower cost base contributed to the company registering a 73,48% increase in profit after tax to $726 213.
The result of the increased profit after tax led to the basic earnings per share rising by 73% to 2,21 cents from 1,28 cents in the same period in 2016 showing gains for shareholders which helped grow its market cap.
Further, CAFCA registered a current ratio of 7,94 showing it was in a good position to pay its short-term and long-term obligations giving investors confidence in the company dealing with debt.
The net profit margin of the company at the end of the period under review was also in positive territory at 3,76%.
Edgars has seen a year to date growth of 11,9%.
In Edgars report for the 26 weeks ending July, controls over credit policies, improved debt collection and policy and changes in credit management contributed to a 420,07% increase in profit after tax of $567 499.
The performance was driven by good merchandise assortments and resurgent consumer spending. The renewed confidence in the new dispensation has slightly reflected on consumers leading to improved demand.
These efforts saw the company have a net profit margin of 2,29% showing the company would enter its second half period in a profitable position.
Stockbrokers expect the trend of other counters performing over traditional counters such as Delta, Econet and Old Mutual to continue.
