Demand for OMZIL B-Class shares to spike

08 Nov, 2019 - 00:11 0 Views
Demand for OMZIL B-Class shares to spike Minister Ncube

eBusiness Weekly

Tawanda Musarurwa
Foreign investors are likely to make a run on Old Mutual Zimbabwe Limited (OMZIL)’s shares listed on the Financial Securities (FINSEC) Alternative Trading Platform once the Indigenisation and Economic Empowerment Act is completely repelled, according to analysts. Government has been amending the Indigenisation and Economic Empowerment Act to attract foreign investment.

Finance and Economic Development Minister Mthuli Ncube, said a total scrapping of the law was in the pipeline.

“Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act, which will be consistent with the current thrust ‘Zimbabwe is Open for Business’,” he said while presenting the Mid-term Fiscal Policy Review earlier in August.

Analysts at Morgan & Co contend that the “open economy”approach will draw foreign investors to the country’s blue chip firms.

“Changes in indigenisation policies in Zimbabwe mean that OMZIL shares listed on FINSEC are now available to foreign investors. We believe that OMZIL is a well-known blue-chip that will be attractive to foreigners when they eventually decide to invest in Zimbabwe again,” said Morgan & Co in a recent research note.

“Traditionally, foreign investors have been overweight in blue chips such as Delta and Innscor. We think that demand for OMZIL shares from foreigners will allow the stock to move to above-market PERs (in line with international peers) hence a dramatic re-rating in the medium term should be expected.”

OMZIL is currently the only company whose equity is listed on FINSEC.

The FINSEC ATP allows for the listing and trading of a wider range of products that have hitherto not been obtainable in Zimbabwe but can be lucrative.

OMZIL became the first company to trade on the FINSEC ATP in December 2016 after it listed its “empowerment shares”.

The empowerment shares (also known as B-Class shares), constitute 25 percent of the group.

At opening, 107 847 shares traded at 82 cents with turnover at US$88 563 while market capitalisation closed at US$68,14 million.

Prior to the FINSEC listing, OMZIL’s B-Class shares were being traded exclusively over the counter at Old Mutual Securities.

Although now available broadly for participation by stockbrokers, custodians, qualifying indigenous individuals and institutional investors, trades for the FINSEC listed shares has been rather limited.

Meanwhile, the analysts see OMZIL’s performance unaffected by prevailing economic conditions and view it as a “blue chip asset play and inflation hedge”.

“We note that FY 2019F total revenues will reflect further growth in core businesses as well as fair value gains on investments given the changes in the currency regime in Zimbabwe. That said, we expect growth rates to remain strong in FY 2020F and beyond.

“We estimate a FY 2018-2022F revenue CAGR of 68,7 percent driven by (i) growth in net earned premiums, (ii) banking interest and income. The OMZIL business model remains intact despite the macroeconomic headwinds and accounting uncertainties in Zimbabwe,” said Morgan & Co.

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