Earlier in the year, CBZ chairman Marc Holtzman indicated a potential upturn in the comparably low price of the financial institution’s stock on the Zimbabwe Stock Exchange (ZSE).
This was in February, with the stock having risen to around $1,05 cents from $0,6971 cents at the end of 2019.
It was a fair comment given that most equities on the ZSE had been overridden by inflation and were indeed cheap.
Since then CBZ Holdings’ share price has spiked to 2 995,65 cents a share, a 2 757 percent increase over a five-month period.
Analysts at research firm Emergent Securities believe that at current price, CBZ’s stock has significant downside.
They estimate an 80 percent cut on current price to reach optimum level.
“We rate CBZ Holdings a ‘Sell’ with a price target of 605 cents. Current price is 2 995,65 cents. We adopted the excess returns valuation model to estimate the intrinsic value.
“Our assumptions behind the excess returns valuation include an ROE (return on investment) based on total comprehensive income of 40 percent in 2020 from 45 percent in 2019.
“The ROE ratio will decline by each year from 25 percent in 2021 to 20 percent in 2022 until it settles on a sustainable 16 percent going forward. Our cost of capital will decline as well and settle on a sustainable 14 percent into the long term,” said the analysts.
CBZ Holdings is the country’s largest bank holding group by total assets, deposits, loans and market capitalisation.
The financial institution has outperformed peers on several metrics including growth in loan book, deposits and total income earned for the period FY2019.
Cost to income has significantly gone down for FY2019 and recently for the first quarter dropping to 31 percent.
Its subsidiaries include CBZ Bank Limited, which provides commercial banking and mortgage finance products; CBZ Asset Management (Private) Limited, which provides fund management services to investors through placement of either pooled portfolios or individual portfolios, and CBZ Insurance (Private) Limited, which provides short term insurance. Its other operating units include CBZ Properties (Private) Limited, which acts as the property investment arm of the business; CBZ Life (Private) Limited, which provides long-term life insurance.
But the year-to-date performance of its stock means that “CBZ’s market capitalization (at $20,5 billion) dwarfs the combined sizes of the other four listed banks by $5 billion”, said Emergent Securities.
CBZ Holdings currently trades at a price to book multiple of 7,30 based on current price and the net book value (equity).
“Price to tangible book value is 7,33. CBZ Holdings is trading a premium to peers with the exception of FBC Holdings, which trades at a Price to tangible book value of 12,25.
“The average price to tangible book value ratio for the other four banks is 5,20.”
The bank’s stock has rode on the ZSE’s rally as investors and speculators have piled onto the bourse to hedge against inflation and currency depreciation.
There is however no guarantee that the trend won’t continue when the ZSE reopens on August 3.