FBC holds on to Turnall stake

In a company report to December 2011, FBC Securities said the strong vertical integration remained a strategic investment to the group.
FBC Holdings gained control of the company through its banking arm, FBC Bank.
The bank had gained a controlling stake in three SMM Holdings subsidiaries after the latter failed to settle a US$8 million debt facilitated by the bank from African Export and Import Bank.

FBC Bank, in line with central bank regulations that bar banks from holding on to non-financial entities for more than a year, decided to shed the 28 percent stake it had gained in Steelnet and offloaded its interests in Turnall to the holding company.
The bank also disposed of its 19 percent stake in General Beltings.

“A coalition strategy of FBC Building Society and Turnall to supply building materials for the development of infrastructure projects is expected to boost revenue and earnings for the group,” said the report.
“This is expected to re-rate the share price up wards,” said the group.

It maintained that Government effort to support infrastructure development and to improve sanitation was directly beneficial to the manufacturing division.
“Ultimately, expected increases in demand both in the insurance and manufacturing divisions justifies improved earnings which would translate in a positive trend in the stock price.”

Compared with its peers on year-to-date basis, FBC Holdings is ranked fourth after TN that gained 400 percent, ABC and ZB, moving 100 percent apiece.
FBC Holdings controls 95 percent of Eagle Insurance and it has positioned itself in the direct insurance business.

The group is bound to re-rate upwards, despite the earnings per share remaining subdued relative to price/share for the better part of the business operations, backed by the strategic synergy in Eagle Insurance.
“Notwithstanding that the insurance industry business was uncertain and unprofitable of late, the insurance industry has begun to recover, largely on the renewal of confidence within the sector,” said the report.

This is expected to improve group revenue, generating capacity and further push the price of the company upwards.
Steady growth continued to be witnessed at Turnall, albeit at a slackened pace, as exports remained subdued – the firm commissioned a new machine in April last year.

Importation of fibre remains a threat to the unit’s margins. With the availability of local fibre, the division expects increased margins, given its leading position in the market.

The group said to sustain its market position the company intends to increase capital expenditure in expanding its non-asbestos plant in Bulawayo.
Currently, Turnall commands 80 percent of the local market.