eBusiness Weekly
Rufaro Hozheri
The Quick Service Restaurant (QSR) operator domiciled in Zimbabwe but with a presence in nine (9) Sub-Saharan Markets recently indicated its intention to move from the Zimbabwe Stock Exchange (ZSE) to the Victoria Fall Stock Exchange (VFEX).
This move will make Simbisa the 5th counter on the US dollar-denominated exchange and the 4th to migrate from the ZSE.
Local companies listed on the ZSE have two options, to either list a maximum of 20 percent stake on the VFEX but different class of shares to avoid fungibility or to completely delist on the ZSE and migrate to the Victoria Falls based exchange.
The announcement to move comes after the company indicated in its FY22 results that it plans to inject US$23 million towards expansion, aiming to open 87 new stores in the following financial year.
Although not much has been disclosed by management as to what triggered the move, it is safe to assume that it has more to do with capital preservation considering how volatile the other exchange is.
The previous companies that joined the VFEX i.e. — Padenga Holdings and Bindura Nickel Corporation were motivated by the need to retain 100 percent proceeds of their export earnings. This might not be the case for the fast-food business which already enjoys that benefit as it falls under the tourism sector. The tourism sector was allowed to keep all their foreign currency sales to aid in recapitalising.
Simbisa categorically highlighted in its financials that it does not access foreign currency from the Auction system, and it generates all its foreign currency from operations. With that in mind and considering that the company recently declared its dividend entirely in the greenback it only made sense for the company to cross over to the VFEX. After the move, the company will report entirely in USD giving a clearer picture of the company’s operations.
Simbisa currently operates 567 outlets across the continent and plans to expand aggressively in the foreseeable future. Although current plans are to finance expansion with cash flows from the operations, chances of external financing in the future can’t be thrown away and it will be better placed to attract international capital on the VFEX than ZSE.
In its latest financials, the company highlighted that customer counts locally were up by 28 percent and 30 percent in the region.
Turnover was 76 percent ahead of previous reporting period, with the region recording a 38 percent growth in revenue after adjusting for inflation. If Simbisa were to dish out all its profits to shareholders, assuming current price and latest earnings, it would take 9 years for shareholders to recoup their money thereby giving a P/E ratio of 9X which is cheaper compared to other global QSRs.
On the ZSE, Simbisa is one of the heavy weights and liquid counters. It was the best performing counter before “May 7” measures that completely changed the modus operandi on the exchange. It is in the top 5 biggest counters by market cap and sometimes feature on the top 5 daily turnover.
Simbisa will be listed by way of introduction on the VFEX on a date yet to be disclosed and shareholders will maintain their number of shares.
However, a new price in US$ will be allocated initially per share but the market forces will decide how to value the shares. Given the company’s attributes, can the counter bring the spark that the exchange is in dire need for?
On the other hand, activity on the VFEX improved this year. Trades in Padenga and Bindura are now happening on a more consistent rate, with SeedCo yet to show signs of consistency.
The tightly held Caledonia Depository Receipts seldom trade. Turnover for the first 3 quarters of the year totalled US$11,4m with 93 percent of that recorded in the first half of the year.
The VFEX direct, a platform for investors to remotely trade on the exchange is expected to also boost activity especially from the retail investors.
Cost of trading on the VFEX is cheaper than on the ZSE. In fact, you do not incur capital gains tax when you sell shares unlike on ZSE and dividends withholdings tax for foreign investors is only 5 percent.
It is quite apparent that more listings are needed on the exchange for it to achieve its intended objectives.
Simbisa coming on board could be one of the steps, but the other steps include listing of debt instruments and other securities like Exchange Traded Funds (ETFs) which are now more popular on the ZSE.
Indications of raising money to pay former white farmers on the VFEX were given by the Government and word on the street is that we could witness the listing of an ETF on VFEX anytime soon.
Rufaro Hozheri is a local financial analyst. He writes in his own capacity. For feedback contact Rufaro on email: [email protected] Cell: 0784 707 653.
