Zimbabwe | ZSE

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 ...

The  Group  posted  defensive  results  despite  a  challenging  operating  environment.  Foreign  currency  shortages continued to  hinder  the  Company’s  ability  to  meet  its  capacity  enhancement  and  routine  maintenance requirements. Headline tariffs, which were last reviewed August 2020, continued to threaten  the industry’s viability especially in such a hyperinflationary environment. Load shedding persisted in the  period  under  reviewed  resulting  in  the  Company  resorting  to  the  use  of  diesel-powered  generators.  Consequently, cost of doing business for the Group increased in the period under review. On the contrary ...