Head on the block

Zimplow (http://www.zimplow.co.zw) will be the first company to put its head on the block when it releases its full year results covering the period January to December 2011 on Thursday the 23rd of February 2012. The market already knows one or two things about these results judging from the share price movement in recent days! They must be good! The share price which had dropped to 6c is trading just short of 9c, a 50% jump in one week. WOW!Some will say dont read too much into this. i have witnessed this trend being repeated over and over again in Zimplow and a few other counters over the years.

Zimplow’s half year results to June 2011 met the market’s expectations and the fact that no interim dividend was declared on account of the need to conserve cash meant that the market was indifferent, as the price more or less stayed the same. The company was one of the first to declare a dividend in the dollarized environment and being predominantly a cash business it is expected to continue paying a dividend. The company’s management is very aggressive and at the company’s AGM last year they said they were confident they would post results that were above an earlier guidance given to analysts at Interim stage. Aggression is good but I hope a few lessons have been learnt after the company had $400,000 trapped in soon to be resuscitated Renaissance Merchant Bank.

NSSA has generously rescued the company and its shareholders from a potentially embarrassing loss of value! If management announces that they have since recovered that money, the share price could jump based on this news as it means the company will be able to pay a handsome dividend.

I always want to look at both sides of the coin. Steel prices, fuel costs, transportation costs might diminish operating margins going forward; impacting on the company’s bottom line. The Agricultural sector is in its third straight year of growth and this is good news for Zimplow, which is a direct beneficiary of increased output. I particularly like the company's business model which is really a simple one, turn steel into implements, nuts and bolts that are direct inputs in productive sectors of the economy. The company is and will always be a clear barometer of what is happening in our economy, and i sense that Thursday will be a good day as the company releases its results. Those of you who enjoy charts can enjoy the Zimplow chart below covering a three year period. Notice how the share price seems to move in steps. Could we see Zimplow stepping up again in coming weeks.

It will be important to see how the well documented liquidity challenge will have affected the company. The second half of the year is always good for the company. The coming back on stream of Zisco (now Newsteel) will reduce operating costs etc and may very well improve margins in the future. This is one good company that has got lot going for it, I say. There you have it, Let us see what Thursday has in store for us.