Foreigners spur Zimbabwe bourse

Published: 26 September 2013

FOREIGN investors have put $360 million on the Zimbabwe Stock Exchange (ZSE) since the switch to multi-currencies in 2009, the biggest ever form of foreign direct investment the country has received despite popular sentiment that the bourse is only for speculators, recent statistics showed last week.

And foreign investors who have defied market sentiment and invested on the ZSE's heavyweight counters have seen the value of their investments balloon, according to a report by Imara Capital Zimbabwe, the country's biggest stock broking firm.

Imara's hot picks in 2006, beverages producer Delta, conglomerate, Innscor Africa Limited and telecoms operator, Econet Wireless, have reported strong growth in earnings.

An investor who spent $1 million on these stocks had returns as high as three fold, according to Imara's managing director, Sean Gammon.

Gammon said in spite of the improved value, these counters remained undervalued compared to their regional and international peers, implying that there is still room for offshore investors to buy into these equities and see values grow.

"The stock market is often overlooked as a source of investment flows," Gammon told a post-election economic review conference organised by Econometer Global Capital last week.

"This overlooks the fact that net foreign investment inflows into the ZSE since the introduction of the multi-currency regime is currently $360 million, bigger than any other investments, including the mining industry…comparing favourably with much of the investments made in the real economy over the period," said Gammon.

"Among our stock picks (in) October 2006 road show (to the USA) was Delta at US27 cents a share, Innscor at US31 cents and Econet at US19 cents. A million dollar investment in these three stocks at that point would now be worth $3,2 million, despite the market correction since 31 July," said Gammon.

"The winning stock pick from that visit, however, was Circle Cement, now Lafarge.

"This stock was trading at US7 cents a share, a market capitalisation representing a third of sales! The share price is now $1,15, a 16 bagger for the brave investor," he said.

"Although the multi-currency regime has brought stability to pricing, leading investors to pay more attention to price earnings ratios, and even attempt discounted cash flow valuations, the discount to absolute asset values, or to regional comparative stocks remains a widely spread tool. On ths basis, the likes of Delta still offer a reasonable discount to regional peers, while Econet is one of the cheapest stocks in its sector in the world," said Gammon.

Offshore investors have taken a keen interest in retail counters on the ZSE, with fast moving consumer goods counters among the most sought after.

The ZSE, which ended the year 2012 with a market capitalisation of about $4 billion, is expected to end the year close to $6 billion.

Supermarket chain, OK Zimbabwe, has been featuring in most foreign deals, signaling how foreign investors have been attracted to the counter by the slow alignment of its margins with regional competitors.

The retail giants' gross margins during the first half of 2012 ended at 17,1 percent but were eight percentage points behind regional peers that averaged about 25 percent.

This improvement could now be attracting elusive foreign capital.

An analysis of ZSE foreign deals by The Financial Gazette's Companies & Markets confirmed that indeed beverages producer, Delta, Innscor Africa, Econet and fashion giant Edgars were among the counters that attracted foreign interest.
- fingaz

Tags: ZSE,