Zimbabwe | ZSE

Month on month inflation trended upwards for the quarter possibly in response to increased government spend on agricultural inputs. The parallel market was considerably volatile gaining 27% over the quarter, the highest quarterly gain since 2Q20. The local currency gradually increased 8% in the first 3 quarters of the year on the back of an increase in money supply. Consequently, the parallel market premium closed 3Q21 at 98% from 59% in 2Q21. On the Zimbabwe Stock Exchange (ZSE), the All Share Index has been on an upward trend, outperforming 2Q21. The ZSE Market Cap is up 246% YTD in real terms while value traded seems to be flat over the period under review.

Zimbabwe Banks Overvalued: Zimbabwe Banks are trading above their historical average multiples as well as above comparable regional banks in more stable economic environments. Profitability metrics for the sector have been elevated over the past two years, owing to inflation driven earnings and non-cash revaluations. However, we have observed more stable economic indicators over the past twelve months, particularly inflation and exchange rate, we forecast this stability to spill over into 2022. On this backdrop, we expect margins to correct downwards while revaluations are expected to smoothen – interim results being released in the June 2021 period are already reflecting this trend. As a result, we believe the current valuations are not sustainable as earnings moderate; we recommend reducing exposures to the banking sector at these levels.

The company registered strong growth in revenue despite the continued scourge of Covid-19, with decreased trading hours in distribution outlets and weakened consumer purchasing power being a recurrent theme through 1H21. BAT moved to counter Covid-19 hit volumes through strategic marketing exercises yielding a 27% sales volumes growth compared to the same period last year. Revenue grew 350% y/y from $288.44mn to $1.30bn from a cocktail of recovering volumes, price increases and export of cut-rag. Receipts from cut- rag exports ...

The operating environment during the first half of the year was marked by a more positive macroeconomic sentiment characterized by improved foreign currency availability through the RBZ auction system, increased economic activity, and moderating annual inflation. Lending rates declined in the first quarter of the year mainly for large corporate borrowers due to increased liquidity. However, interest rates continued to lag behind inflation. In historical terms, the Bank’s total deposits increased to ZWL$9.8bn, a 11% increase from ZWL$8.8bn recorded in December 2020...

The operating environment proved challenging as Covid-19 remained a key impediment to the smooth flow   of business operations on a global scale. Core operating income from interest payments for the Group grew  556%  y/y to  ZWL$839mn  driven  by  an  uptick  in  loans  and  advances  to non-banking entities. Whilst the  bank maintained strict credit underwriting standards and aggressive collections, NPL’s rose from 0.44% to  0.63%  for  the  6  months  to  June  2021.  Loan  to  deposit  ratio  remained  flat  y/y  at    67%  with  net  interest  income subsequently registering a 717% growth y/y from ZWL$106.72mn to ZWL$875.85mn,  outperforming 106.6% annual inflation. The bank continued ...

Demand in the first half was firm as the lockdown was eased and the auction system paved the way for a more stable local currency. Volumes for Liquid Milks, Foods and Beverages were up 22%, 52% and 87% respectively. The supply side was hampered by COVID-19 induced disruptions to the supply chain as well as a 2% fall in national milk production. Below average rainfall seasons before 2020/21 led to a shortage of stock feed which naturally pushed up the price; the high price meant dairy farmers could ...