Portfolio Manager’s Digest Q2 2013 - Old Mutual: Investments ... · include the acceptance by...

RESEARCH NOTE│ZIMBABWE

Members of the Zimbabwe Stock Exchange 4

th Floor, CABS First Street, Harare, Zimbabwe

Tel: +263-4-252-006, Box HR 1206, Email: [email protected]

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PORTFOLIO MANAGER’S DIGEST

SECOND QUARTER 2017





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OUTLINE Page

Market Summary .................................... 3

Trade Statistics .................................... 4

Economic Review ..................................... 5

Equity Return Analysis ..................................... 6

Market Valuation Overview ..................................... 7

Sector PER Graphs ………………………………….. 8 - 12

Top 5 Picks .................................. 13 - 14





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“Predicting rain doesn’t count. Building arks does.” – Warren Buffet.

Q2 2017 Zimbabwe Stock Exchange Review

Market Summary The Zimbabwe Stock Exchange’s (ZSE) main Industrial Index firmed significantly during the second quarter of the year gaining 41.03% following the slight decline in the first quarter of the year. The mining index was in positive territory gaining 19.18% underpinned by gains in RIO ZIM. On a 12 month basis the industrial index is up just shy of 94% and the mining index a more significant 182.55%. The resurgence in equity market returns has been underpinned more by currency instability and inflationary fears resulting in subsequent portfolio shifts towards the equity market rather than fundamental motivations for investment. For most listed companies the second quarter of the year witnessed a number of operational constraints. The business environment remained sub-optimal as limited access to nostro funding for working capital needs coupled with depressed demand as customers’ disposable incomes remained low resulted in slowing revenue performance and thinning margins. In addition, uncertainty regarding the regulatory environment and political instability posed a challenge for strategic planning and capital expenditure budgets. It was not all negative however as some companies benefitted from some of the regulatory changes. The manufacturing sector benefitted from the import ban resulting in firmer demand for locally produced products. The retail sector benefitted from increased capture of sales from the informal market as physical cash in circulation dried up and shifted towards plastic money which the informal market had no capacity to take up. The financial sector benefitted from the increased volume of transactions and interest income from treasury instruments, some of which were acquired at significant discounts. Mining houses and commodity companies benefitted from the stability in commodity prices and more successful agricultural season respectively. The total value of shares traded on the ZSE in Q2 2017 was US$68.6m which is 47.6% firmer than the total value of trades recorded in Q1 2017. It should be noted however that foreign investors were net sellers of US$14.5m worth of equities on the ZSE and accounted for 28.6% of all trades. This is significantly lower than the 48.9% in Q1 2017. Foreign investor participation has waned due to challenges in remitting sales proceeds from the ZSE back to their source countries. Increasingly, local investors have increased their participation in the equity’s space due to currency concerns highlighted earlier.

Some of the significant events that happened during the quarter include the acceptance by Barclays Bank Plc. of an offer by FMB of Malawi for their shareholding in Barclays Bank Zimbabwe; CFI’s major shareholder, ZIMRE-linked Stalap , increasing its stake to 41.03% in CFI and therefore has announced making a mandatory offer to minority shareholders; Colcom’s major shareholder, Innscor, indicating its intention to buy out minorities and voluntarily delist from the ZSE; First Mutual’s intention to acquire a listed insurance firm (potentially NICOZ Diamond) and similarly NICOZ Diamond’s major shareholder, NSSA, indicating its intention

to sell its stake in the company; Meikles indicating that an offer will be made for Meikles shareholding and voluntary delisting from the ZSE; and Mr. B. Nkomo being appointed as substantive CEO for Rio Zim. The table below shows the key performers and non-performers during Q2 2017 and the 12 months to June 2017. The graphs show the trend for the industrial and mining Indices as well as the value of trades.

Top Movers

Q2 2017 % Change 12 Months % Change

INDUSTRIAL 41.03% INDUSTRIAL 93.95%

MINING 19.18% MINING 182.55%

ARISTON 100.0% MASIMBA 531.58%

POWERSPEED 100.0% ZBFH 450.00%

ZIMRE 40.63% FIRST MUTUAL 381.82%

FIDELITY 40.00% INNSCOR 316.18%

AXIA 38.57% HIPPO 276.3%

Top Losers

Q2 2017 % Change 12 Months % Change

CAFCA (55.0%) NTS (35.29%)

MEDTECH (50.0%) ZIMRE (21.79%)

INNSCOR (37.48%) RTG (17.5%)

BINDURA (34.64%) HWANGE (16.67%)

BARCLAYS (34.12%) DAWN (12.5%)

Industrial and Mining Index Q2 2017 Trend

Industrial and Mining Index 12 Month Trend

Source: ZSE & OMSEC Research Data base





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Zimbabwe Stock Exchange Trade Statistics

Total Value

Traded Volume Traded

Industrial Index

Mining Index

vol of shares (foreign)

val. of shares (foreign) $

Net Foreign Inflows

$ market capitalisation

ZSE Liquidity

foreign participation

%

Jul-16 $ 11,838,625 57,222,624 98.84 25.72 71,201,211 $ 13,499,671 $ 5,151,276 $ 2,722,044,639 5.2% 57.0%

Aug-16 $ 7,075,762 41,264,438 99.26 26.32 28,633,955 $ 6,522,372 $ 4,328,463 $ 2,734,327,076 3.1% 46.1%

Sep-16 $ 13,049,389 69,049,535 98.96 26.61 44,704,941 $ 12,674,651 $ 6,370,229 $ 2,725,133,069 5.7% 48.6%

Oct-16 $ 23,200,856 177,384,284 120.82 33.76 144,207,441 $ 20,972,942 $ 16,830,811 $ 3,328,256,173 8.4% 45.2%

Nov-16 $ 23,460,016 233,749,377 137.08 57.38 159,101,141 $ 20,525,189 $ 12,921,251 $ 3,804,635,536 7.4% 43.7%

Dec-16 $ 25,996,713 292,538,969 144.53 58.51 81,833,814 $ 13,757,064 $ 10,859,623 $ 4,007,957,110 7.8% 26.5%

Jan-17 $ 8,552,699 31,616,982 140.24 56.31 19,323,858 $ 6,925,479 $ 4,103,212 $ 3,903,660,506 2.6% 40.5%

Feb-17 $ 10,970,197 85,314,995 135.31 56.47 47,031,594 $ 7,203,314 $ 3,827,979 $ 3,770,004,126 3.5% 32.8%

Mar-17 $ 26,933,720 242,884,187 138.96 58.56 216,705,470 $ 31,275,275 $ 6,449,962 $ 3,871,279,708 8.3% 58.1%

Apr-17 $ 11,205,670 75,857,712 143.20 66.33 56,436,354 $ 9,497,105 $ 6,779,518 $ 4,189,381,215 3.2% 42.4%

May-17 $ 17,637,003 170,830,515 162.34 69.63 109,160,301 $ 13,373,233 $ 5,311,884 $ 4,740,101,598 4.5% 37.9%

Jun-17 $ 39,747,329 311,145,262 195.97 69.79 111,411,757 $ 16,391,394 $ 2,384,899 $ 5,695,198,739 8.4% 20.6%

12 Month Total $ 219,667,979 1,788,858,880 195.97 69.79 1,089,751,837 $ 172,617,690 $ 85,319,110 $ 3,790,998,291 5.8% 39.3%

Average*

(ZSE and OMSEC Research Data base June 2017)





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Economic Review The initial harvest projections for Zimbabwe’s 2016/17 agricultural season are expected to benefit the economy in two critical areas, one is in the attainment of food security and secondly the reduced need for imports. According to statistics from the Food and Agriculture Organisation’s Global Information Early Warning System 27 June 2017 country brief on Zimbabwe; the country is expected to harvest 2.1 million tonnes of Maize, the country’s staple crop, against annual needs of 1.4 million tonnes. Total cereal harvest is expected to be 2.5 million tonnes whilst cotton production is expected at 125,000tonnes versus 16,000tonnes last year. The growth in production has been enabled by a significantly larger area under cultivation due to support facilities availed by Government. According to industry experts, the tobacco marketing season is not expected to perform with the same positive vigour as other agricultural crops in terms of output. This is because lower yields from tobacco harvests are expected due to excessive rains having a negative impact on the average yield per hectare. By and large however total sales are expected to be close to the 2015/16 selling season of 200 million kgs. The performance of the mining sector which accounts for an average of 60% of the country’s exports has a huge bearing on the economic prospects of the country. More-so now with the low nostro account balances in the banking sector and shrinking physical cash in circulation. The outlook for the mining sector and indeed the performance after the first half of the year has fallen below the Government’s initial optimistic projections. This is due to constraints in accessing capital; limited activity due to heavy rains and delays in the simplification of the regulatory environment thus far in 2017. Gold output is unlikely to attain the 28 tonne target set by Government with projections of 22 tonnes for 2017 being forecast as more likely by the chamber of mines. Generally the mining sector is unlikely to achieve significant growth if the following remains unresolved; the resuscitation of old mines, increasing installed capacity and the development of new mines through exploration. All these factors hinge on key milestones that are yet to be achieved by the gazetting of a revised mines and minerals bill.

Source: ZIMSTAT

On the Macro-economic front, inflationary pressures have persisted with year on year inflation for the country rising to 0.75% as at May 2017. The growth in prices according to the Consumer Price Index is being fuelled mainly by food and non-alcoholic beverages as well as education costs. These two items together account for 39.2% of the total basket of goods used to measure inflation. We believe inflation is arising more from cost push than demand pull factors given the limited aggregate demand locally as consumers have limited disposable incomes.

Investment Markets Review and Outlook Equities The positive performance in Q2 2017 saw a reversal of the marginal decline experienced in Q1 2017. This was notwithstanding the lacklustre reporting cycle for listed companies for their FY 2016 and March 2017 interim and FY financial periods. Investor uncertainty still remains as the financial system fails to adequately settle foreign investor disinvestments on the one hand due to nostro funding shortages and cash demands for local investors on the other. As a result, foreign investors have remained largely net sellers whilst local investors have been driven to equity purchases for value preservation purposes. June 2017 saw a surge in trades to US$39m as currency uncertainty compelled many local investors to hedge this risk by buying equities. The outlook for the equities market is expected to perform better than money market and or near cash assets as investors are expected to continue making a flight towards equities to prevent value erosion. Property Sector The property sector has continued to experience increases in voids as economic activity becomes increasingly informal and the demand for formal property space continues to shrink. Property sector players who are able to adapt and provide properties that can service the needs of the informal sector are expected to yield better results. Given the lead time to renovate properties that service the informal sector better we do not expect a turn-around in this sector in the short term. Properties valuation could however receive support from risk-hedging investors. Money Market Given the Reserve Bank of Zimbabwe’s resolve to put a ceiling of 12% on all loans, the potential for earnings spread has become thinner. As such money market rates are expected to remain comparatively depressed. We expect the credit environment to improve only in the medium to long term. Bank lending appetite is expected to remain low as companies fail to source nostro funding for critical import needs. This is likely to make it more difficult to place money market investments at attractive yields. Outlook Economic activity is likely to remain depressed and resultantly

investment market fundamental performance is expected to

perform in sympathy to this. Investors are expected to favour value

preservation opportunities ahead of growth.





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Equity Return Analysis

Q1 2017 Q2 2017 Capital Gain/(Loss) Dividend past 12 months Quarter YOY Total

Total Return Analysis (usc) (usc) (usc) (usc) Return Return 12 Month

Return

DELTA 86 127 41.0 3.45 47.67% 89.55% 94.7%

ECONET 16.05 35.38 19.33 0.47 120.44% 68.48% 70.7%

INNSCOR 45 72 27.0 1.30 60.0% 316.18% 323.7%

BAT 1,530.00 1,800.00 270.0 51.00 17.65% 47.54% 51.72%

SEEDCO 95 140 45.0 4.38 47.37% 146.26% 153.97%

NATFOOD 353.77 380 26.23 10.42 7.41% 81.04% 86.0%

OLD MUTUAL 356.18 387 30.82 7.61 8.65% 69.37% 72.7%

PADENGA 18.25 27.05 8.8 0.83 48.22% 212.36% 221.94%

HIPPO 39 75.26 36.26 - 92.97% 276.3% 276.3%

OK 6.1 9.5 3.4 0.26 55.74% 216.67% 225.33%

SIMBISA 17.1 20 2.9 0.35 16.96% 53.85% 56.54%

FBCH 8.02 13.45 5.43 0.52 67.71% 110.16% 118.3%

BARCLAYS 3 4.08 1.08 - 36.0% 172.0% 172.0%

TSL 20.7 22.5 1.8 0.30 8.7% 54.64% 56.7%

AFDIS 55 61 6.0 0.50 10.91% 35.56% 36.67%

CBZH 9.99 10.05 0.06 0.47 0.6% (7.8%) (3.52%)

RIO ZIM 40 55 15.0 - 37.5% 223.53% 223.53%

COLCOM 37.25 41 3.75 1.05 10.07% 124.66% 130.41%

MEIKLES 12 25 13.0 - 108.33% 257.14% 257.14%

AXIA 7 9.7 2.7 0.29 38.57% 29.33% 33.2%

Mid Cap Listed Companies

PEARL 3.3 3.4 0.1 0.06 3.03% 70.0% 72.95%

GETBUCKS 3.7 3.7 0.0 0.02 0.0% (7.5%) (6.92%)

FIRST MUTUAL 6.86 10.6 3.74 - 54.52% 381.82% 381.82%

LAFARGE 48 50 2.0 2.500 4.17% 85.19% 94.44%

MASH 2 2.13 0.13 0.03 6.5% 29.09% 30.91%

BINDURA 3 3 0.0 - 0.0% 200.0% 200.0%

NAMPAK 3 5 2.0 - 66.67% 163.16% 163.16%

DAWN 1.25 1.4 0.15 - 12.0% (12.5%) (12.5%)

ZBFH 11 16.5 5.5 - 50.0% 450.0% 450.0%

ART 6.5 5.5 (1.0) - (15.38%) 90.97% 90.97%

ZPI 1 1.35 0.35 0.03 35.0% 87.5% 91.53%

DZL 5 6.21 1.21 - 24.2% 24.2% 24.2%

ZIMRE 1.65 1.4 (0.25) - (15.15%) (21.79%) (21.79%)

RTG 1.19 0.99 (0.2) - (16.81%) (17.5%) (17.5%)

CFI 12.15 16.8 4.65 - 38.27% 128.88% 128.88%

Currency Appreciation Q1 2017 Q2 2017

Quarter Return

YTD Return

usd/zar 13.3063 13.0871

(1.65%)

(4.67%)

usd/gbp 0.80056 0.77124

(3.66%)

(5.01%)

usd/eur 0.93566 0.87636

(6.34%)

(7.58%)

usd/yen 111.876 112.118

0.22%

(4.15%)

*Source: OMSEC Research Data Base





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Market Sector Valuation Overview

30-Jun-17

MKT CAP

SECTOR (usd m)

SECTOR

SECTOR

SECTOR INDEX

Sector

usd(m)

R. Earnings

R. P/E

P.NAV

YTD RETURN

Commodities

575.0

25.6

22.48

1.2

49.3%

Bank

332.6

69.2

4.81

0.6

27.8%

Insurance

305.8

6.7

45.38

0.02

12.7%

Beverages

2,042.9

74.3

27.51

3.5

39.3%

Diversified

80.4

-26.8

-

0.6

87.6%

Food

436.5

26.4

16.52

2.8

7.9%

Hotel

31.0

0.14

228.81

1.6

(3.9%)

Retail

570.0

33.5

17.02

1.8

56.8%

Consumer

152.3

9.5

16.03

2.8

48.0%

Communication

916.5

38.0

24.09

1.3

91.3%

Manufacturing

191.4

71.0

2.70

0.3

20.0%

Property

139.3

8.2

16.97

0.4

10.6%

Mining

112.2

-90.1

-

-0.8

18.5%

Source: OMSEC Research Data Base





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ZSE Sector Price Earnings Relative Comparisons

Banking Sector P/E Graph

Bank Value Quarter Change

Sector Index 181.0 27.79%

Best Performer

FBCH 13.45 67.71%

Worst Performer

GET BUCKS 3.7 (0.0%)

ZBFH, NMB and CBZH are the most attractive companies on a P/E scale. GETBUCKS’ relatively low earnings saw its P/E balloon to 14.8X. The banking sector earnings remain quite subjective given potential impairment write offs and NPLs.

Beverages Sector P/E Graph


Best Performer

DELTA 127 47.67%

Worst Performer

AFDIS 61 10.91%

DELTA is the only company whose P/E is attractive on a comparative basis. However we believe that the sector is currently overheated. DZL following their loss has no P/E value and AFDIS’s and BAT P/Es show that the companies are trading at inflated prices.

Commodity Sector P/E Graph

Commodities Value Quarter Change


Best Performer ARISTON 01 100%

Worst Performer STARAFRICA 1.2 7.14%

The best performer in the commodities sector was ARISTON with a 100% return. During the quarter, commodity prices have been stabilising, locally however utility costs and production delays worked against this sector’s performance. SEEDCO is the most attractive contender on a P/E scale whilst HIPPO and TSL are overvalued on a sector relative P/E scale.





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Communication Value Quarter Change


Best Performer

ECONET 35.38 120.44%

Worst Performer

ECONET 35.38 120.44%

Econet is the only company whose operations are in the mobile communications sector and listed on the Zimbabwe Stock Exchange. Notwithstanding being the only listed company they remain a market leader even amongst its unlisted peers. On a P/E scale the company is trading at a slight premium to the ZSE overheated P/E of 23X.

Specialised Goods Sector P/E Graph

Specialised Value Quarter Change


Best Performer

PADENGA 27.05 48.22%

Worst Performer

ZIMPAPERS 1 42.86%

PADENGA added 48.01% during the quarter and was the best performer in this sector. ZIMPAPERS operations have begun to turn a profit following its restructuring however we are concerned by the size of receivables on the company’s balance sheet. The company managed to return 42.86% during the quarter.

Diversified Sector P/NAV Graph

Diversified Value Quarter Change


Best Performer

MEIKLES 25 108.33%

Worst Performer

CFI 16.8 38.27%

CFI’s subsidiary units are under judicial management with potential recapitalisation still being pursued through a technical partner however the restructuring of the business has resulted in a profit in their first four months of operations for 2017. The company is fairly valued attractive on a market wide relative P/E scale.





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Food Sector P/E Graph

Food Value Quarter Change

Sector Index 3,742.0 7.94%

Best Performer

SIMBISA 20 16.96%

Worst Performer

NATFOOD 380 7.41%

COLCOM is now overvalued on a P/E metric and is trading under cautionary. NATFOOD with a P/E of 18.3X is trading at a fair value to the sector average P/E whilst SIMBISA is attractive on a sector average relative P/E scale.

Hotel Sector P/NAV Graph

Hotel Value Quarter Change

Sector Index 45.5 (3.87%)

Best Performer

AFSUN 1.5 25.00%

Worst Performer

RTG 0.99 (16.81%)

AFSUN has turned a corner and registered the only profit for the listed hotel companies. The sector continues to suffer from limited capacity as occupancy levels remain restrictively low. AFSUN has registered a profit following aggressive debt restructuring and payments as well as cost control.

Insurance Sector P/E Graph

Insurance Value Quarter Change


Best Performer

FIRST MUTUAL 10.6 54.52%

Worst Performer

ZIMRE 1.4 (15.15%)

FIDELITY and FIRST MUTUAL remain attractive on a P/E basis. OLD MUTUAL’s share price recovery is underpinned by its fungibility status in light of domestic currency concerns and the impending managed separation.





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Manufacturing Sector P/E Graph

Manufacturing Value Quarter Change


Best Performer MASIMBA 4.8 152.63%

Worst Performer ART 5.5 (15.38%)

Manufacturing sector companies have been increasingly trading in the black however quite a few remain in loss territory. Investment in this sector should involve a further analysis of the respective company’s cash-flow and gearing level given the limited liquidity in the market as well as the recapitalisation needs of the company.

Mining Sector P/CF Graph

Mining Value Quarter Change


Best Performer

RIO ZIM 55 37.5%

Worst Performer

HWANGE 2.5 (13.79%)

Profitability has returned for two of the four listed mining sector companies. RIO ZIM following its new mine plan, acquisition of palatial gold mine and debt restructuring registered a significant profit recovery. BINDURA had a similar recovery in its bottom line as it centred on cost containment. HWANGE and FALGOLD have no P/E basis measurement as they recorded losses in their annual earnings.

Property Sector P/E Graphs

Property Value Quarter Change


Best Performer

ZPI 1.35 35.0%

Worst Performer

PEARL 3.4 3.03%

On a relative P/E basis MASH and PEARL are attractive. However the sector has come under increasing pressure due to lower economic activity resulting in higher voids, downward rental negotiations and arrears. All companies managed a positive bottom line.





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Retail Sector P/E Graphs

Retail Value Quarter Change


Best Performer

INNSCOR 72 60.0%

Worst Performer

EDGARS 4.2 7.69%

The retail index firmed by 56.75% as INNSCOR added 60.0% during the second quarter of the year. AXIA is the most attractive on a relative P/E scale. INNSCOR is just about fairly valued whilst EDGARS and OK are overvalued on a sector relative P/E scale.





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Top Five Picks

NICOZ Latest Fundamentals The company has shown resilience in terms of market share growth in a tough economic environment. The company’s performance has been clouded by non-recurring losses incurred from the FICO Uganda business which is being sold.The outlook for the company looks more optimistic and is currently trading under cautionary from a potential acquisition of the company’s majority shareholding. Key Technicals The technical indicators for NICOZ are in conformance for an uptrend in the short term. We recommend purchasing the company’s shares to take advantage of an anticipated uptrend in the company’s share price. Sensetivity View Best-case Scenario: Recovery in disposable incomes, liquidity improvement and increased uptake of the company’s products. Worst Scenario: Depressed demand arising from poor liquidity and lower disposable incomes. Increased regulatory pressure to invest in prescribed assets which have unpredictable maturity profiles and increasing credit risk regarding coupon payments and ultimate settlement.

Medium to Long-term Buy

Target Price

Usc4.5

Current Price

Usc3

Potential Upside

51%

POWERSPEED Latest Fundamentals Company’s products are in high demand for the home improvement and residential construction activity that is growing albeit at limited levels in the current economic environment. Key Technicals Company is currently oversold on a technical indicator scale and we recommend taking advantage of the share’s price weakness. Sensetivity View Best-case Scenario: Recovery in disposable incomes which would improve demand for its products. Growth in market share and a weaker USD against the ZAR to improve its pricing margins on South African imports. Worst Scenario: Increased liquidity drain, limited aggregate demand, dwindling employment and general decline in disposable incomes which would result in poor uptake of the company’s products as well as continued firming of the USD against regional currencies which would result in limited margin opportunities for its product catalogue.

Medium to Long Term Buy

Target Price

Usc6.12

Current Price

Usc5

Potential Upside

52.5%

NMB Latest Fundamentals The Bank has been punished by the market for having high NPLs on its lending book as well as a concentrated loan book due to legacy issues. The bank has been able to tie down its NPLs and has been showing consistent growth which has not been reflected on the company’s share price. Key Technicals The company is on an upward trend on the Relative Strength Index (RSI) and is neutral on the moving average convergence divergence (MACD) scale, we recommend accumulating the stock to take advantage of the uptrend that is more likely in the medium to long term. Sensetivity View Best-case Scenario: Continued demand for financing. Access to cheaper financing through cheaper credit lines, deposits and other long term sources of cheaper financing. Worst Scenario: Inflationary pressures persist resulting in limited avenues to continue to grow its loan book and incurring real losses on its outstanding loans.

Speculative Medium Term Buy

Target Price

Usc4.7

Current Price

Usc3.7

Potential Upside

27.6%





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SIMBISA Latest Fundamentals The company has shown resilients in terms of market share growth in a tough economic environment. The company has continued to grow it customer numbers albeit customer spend has been declining in the local market. Key Technicals The company’s share price is in oversold territory on the RSI scale and neutral on the MACD scale. We advise taking advantage of the company’s share price in anticipation of medium to long term recovery in the share price. Sensetivity View Best-case Scenario: Recovery in disposable incomes, liquidity improvement and general recovery in the economic environment to underpin consumer spend. Regional operations would benefit from a weaker USD to reverse exchange rate losses incurred when regional operations are translated into USD for local reporting. Worst Scenario: Depressed demand arising from poor liquidity and lower disposable incomes. High inflation causing less competitive products and threatening demand for the company’s products.

Medium Term Buy

Target Price

Usc31.12

Current Price

Usc20.05

Potential Upside

27.1%

BARCLAYS Latest Fundamentals The company has become more cautiously aggressive on its loan book and thus has managed to grow its profitability more aggressively. The company’s parent shareholder, Barclays Plc, is currently exiting African operations and has indicated that it will be selling its shareholding to FMB capital (a Malawian banking group). Key Technicals The company’s technicals indicate that the company is on neutral trend on the MACD scale and is in oversold territory on the RSI scale. We recommend purchasing the stock based on the the potential the company has to leverage on its balance sheet for profitability growth. Sensetivity View Best-case Scenario: Stability and increased confidence in the country’s finacial services sector, lower inflationary pressures and strong uptake of the bank’s medium to long term credit products by high quality borrowers. Worst Scenario: Unsustainably high inflation rates, currency concerns resulting in a continued rally on the bank’s deposits and continued regulatory price controls on interest rate costs and transaction costs.

Speculative Buy

Target Price

Usc4.85

Current Price

Usc4.08

Potential Upside

19%





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The information contained in this document is derived from carefully selected sources. No representation is given about, and no

responsibility is accepted for the accuracy or completeness of this document. Any views expressed reflect the current views of

the author and do not necessarily represent the views of the OLD MUTUAL GROUP or any subsidiary or affiliate of the OLD

MUTUAL Group. The views reflected herein may change without notice. OLD MUTUAL SECURITIES, its affiliates and their

respective officers, directors, partners and employees, including persons involved in the preparation of this document, may from

time to time deal in, hold, or act as market-makers, advisers, brokers, and commercial and or investment bankers in relation to

equities, securities, or derivatives thereof. Members of staff of Old Mutual Securities may or may not hold interests in the subject

matter of analysis and or commentary contained in this document. This document is provided to you for informational purposes

only and should not be construed as and shall not form part of an offer or solicitation to buy or sell any equities, securities or

derivatives thereof. It may not be reproduced, distributed or published by any recipient for any purpose. In connection with its

distribution, this document has been approved by OLD MUTUAL SECURITIES.

Portfolio Manager’s Digest Q2 2013 - Old Mutual: Investments ... · include the acceptance by...

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Transcript of Portfolio Manager’s Digest Q2 2013 - Old Mutual: Investments ... · include the acceptance by...