market report WITH FUNGAI NYAUNGWA
The Zimbabwe Stock Exchange (ZSE) retreated further during the week ended September 6, 2019, shedding $341 million off total market capitalisation to close the week at $21.40 billion (-1.57%).
The impact of the new monetary measures, especially the adoption of a mono-currency, is now evident during this reporting season. Most company financial results are characterised by high profitability on account of fair value adjustments as well as exchange gains, eg, First Mutual Limited reported a 2,228% gain in the bottom line to $201 million largely due a $302 million fair value adjustment on their investment property.
However, given that economic variables are still rather volatile, further adjustments across multiple firms are expected in the next set of results, affecting the quality of earnings and rendering, for example, Price to Earnings ratio comparisons rather misleading at this juncture.
At the same time, volumes growth remains stunted or in negative territory e.g BAT Zimbabwe (-20%) and Dairibord Food volumes (-26%) as expected, given that current economic hardships have strained the average consumer, shifting consumption to basic commodities. Revenue growth remains largely inflationary, but price hikes rarely match the growth in expenditure and this has continued to put pressure on operating margins.
While the recent Treasury Bill auctions point to an inverted yield curve and possibly a better inflation outlook, the uncertainty has made even most corporate managers unsure of the demand dynamics for their products in the short to medium term. This continues to make forecasting and valuations rather difficult.
While no one is spared from the current headwinds in the macro environment, it is anticipated that companies currently monopolizing their markets, with experienced yet agile management teams will weather the storm better than others.
On the local bourse, during the week under review equity gauges traded in the negative except for the Mining Index: the All Share Index tumbled 1.39% to 164.05 points while the Industrial Index traded 1.42% lower to 545.75 points. The Top 10 Index was down 1.88% to 146.16 points again indicating that heavyweights were most affected during the sell-off.
The Mining Index added 0.39% to 262.69 points as gains in Bindura Nickel Corporation of 4.95% outweighed losses in RioZim Limited of 1.80%. Year to date, the market is up 12.18% as measured by the All Share Index.
Top gains for the week were recorded in Ariston Holdings and Zimbabwe Newspapers, both up 20.00%. Other notable gains were seen in Rainbow Tourism Group, up 14.67% and OK Zimbabwe, up 7.32%. First Mutual Limited was the biggest loser, trading 17.65% lower howbeit on thin volumes.
Volumes activity was mainly concentrated in MedTech Holdings and Dawn Properties which contributed 43.19% and 36.66% to total volumes respectively. Total turnover was $41,639,924, a 32.52% increase from the previous week. Turnover was largely dominated by trades in Innscor Africa and Delta Corporation which contributed 19.46% and 13.58% to total turnover respectively.
Among the heavyweights, Delta Corporation traded 5.14% lower to close the week at $2.9350, with $5,654,415 worth of shares trading. Econet Wireless Zimbabwe, Cassava Smartech and Innscor Africa were down 4.56%, 0.70% and 0.58% respectively. Fungible counters traded in the positive: Old Mutual Limited was up 2.36% to $17.9128 on trades worth $3,132,575 while PPC Limited inched up 4.79% to settle at $2.1000 on $2,067,075 worth of trades. The Old Mutual Implied Rate closed the week at 14.6484, down from 15.0280 the previous week.
Fungai Nyaungwa is an equities analyst.