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MARKET watchers believe that consumer stocks, leveraged by their dominant market position and cash-generating capacity, will drive the Zimbabwe Stock Exchange going forward.
There has not been any significant activity on the stock market since the beginning of 2015. However, FDI inflows are expected to come as the country re-engages the West and clarifies investment policies. This, analysts argue, means Zimbabwe is set to recover economically.
“As such, our recommendations are that investors take positions in stocks that can weather the current proverbial ‘storm’ while also positioning themselves for the forecast recovery.
“For this reason, we place a buy on consumer stocks with dominant market position, cash generative capacities, stable business models and modernised equipment,” said ABC stockbrokers.
The recommended stocks include BAT, Colcom, Delta, Econet, Innscor, Natfoods, Dairibord and retailing giant OK Zimbabwe. Recent financials released by some of these companies show worrying declines in volume, revenue and profits.
Delta Corporation reported that revenue declined 4 percent to US$576 million in the year to March 2015 on soft demand for both sparkling beverages and lagers. Net profit fell 13 percent to US$92 million, while lager volumes dropped 17 percent on the prior year.
Analysts, however, forecast Delta’s volumes to recover buoyed by demand for its Chibuku Super brand. The beverages maker will commission a new bottling plant for Chibuku Super in Bulawayo before the end of 2015.
Econet recorded a 41 slump in profit to US$70 million for the year ended February 28, 2015. There is expectation that future growth will be underpinned by revenues from overlay services such as EcoCash.
OK Zimbabwe’s annual revenue and profit also retreated as increased competition from vendors and new market entrants took its toll. On a year-to-date basis, Delta has gained by 2,9 percent, while Econet and OK have dropped 23 percent and 13 percent, respectively.
The market is also bullish about the prospect of export and regionally diversified stocks such as Padenga and Bindura Nickel Corporation as well as well capitalised banks. In addition, Seedco and TSL are tipped to perform better .
Added ABC Stockbrokers: “We also place a buy recommendation on the financial stocks that have managed to contain their NPL (non-performing loans) position, are cleaning up their balance sheets and have taken remedial steps to ensure their balance sheets remain fairly clean going forward.”
Banks such as Barclays, FBCH, NMBZ and CBZH are considered to be in good stead. Although CBZ’s share of deposits on the local market fell marginally to 29,9 percent in 2014 from 30,07 percent in 2013, the bank continues to lead the market in attracting fresh deposits.
Online Reporter