This and that!

GNU discussions appear to be yielding something if we are to believe what we read in the newspapers and the country could finally be moving forward after the 31st of this month. Clearly Mr Zuma’s visit was not in vain. Following the marathon meetings over 2 and half days, it was reported that a “package of measures” had been agreed that would see the GPA move forward “substantially”. Now isn’t that what we have been waiting to hear?

Barring goings on elsewhere, (the Indigenization debate and early elections talk), this is the best news yet, this side of the year and investors on the stock market seem to agree! The industrial index picked up 2.98% on Tuesday on the back of broad based gains in blue chip counters. This gain is the third in as many trading sessions. Nearly $6m worth of shares changed hands Tuesday. A further $1,2m changed hands on Wednesday, with the industrial index climbing by a further 2.70%, bring the year to date movement to -9%. As pointed a few weeks ago, interest has certainly returned to the market, which had seen prices tumble to rock bottom levels in the past fortnight.

Last week we touched on the catalysts for a broad-based gain on the market and reiterate that position this week. Improved liquidity and improved sentiment will see that market record significant gains. For now investors will do well to take advantage of wide price swings that have become the order of the day on the ZSE. The most amazing being Meikles, which had sunk to 30 cents since being re-listed but is now being bought happily at 40 cents. Looking at the value of assets in Meikles and considering that KFHL is still part of the group, it should be trading at a price not less than 75 cents. Yes, the company is still making losses, but the some of parts valuation definitely warrants a price of at least 75cents.

What does Investec see in Zimbabwe that others don’t? (I say so because they are also invested in Falgold) Value and Potential! The company is chasing value and getting it. Investec is the underwriter to a $15m Rights issue approved this week and has extended a 5-year loan at 12.5% to OK. OK is what one could call the largest and most well-known retail brands in Zimbabwe. The company is best known for its “OK Grand Challenge”, which I remember as a kid. “Back in the day” when the Zimbabwe dollar was still a dollar! I remember my parents doing groceries there and I would be so excited to find out what each coupon in store for us. We never won anything substantial but we did it anyway. Now that’s successful marketing. Today I still shop there with my family and that tells you something about OK. It’s a well run company that will be here for generations to come.

News reaching me is that we will see some more big rights issues in the second quarter. Talking to some people that know what is happening, there is a total of $170m that is wanted by 3 companies in the second quarter of this year. Now that’s a lot of “dough”. No doubt there will be a need for agile investors like Investec to come in and underwrite. I am really excited about the ZSE and the type of money it is attracting into our economy. This is real investment and for once the ZSE is doing what it is supposed to do, that is raising affordable equity capital. Yes there is massive dilution for us as local investors, but we will be the winners in the end.

I say this because, over the last decade we have not invested in any of our business in a meaningful way and clearly without new investment, we will not be able to salvage anything from our companies. Enough said! Have a great week.