Zimre Still Considering Delisting

CONGLOMERATE, Zimre Holdings Limited (ZHL) is still considering delisting from the Zimbabwe Stock Exchange (ZSE), saying there were no benefits from a continued listing on the bourse.

\n

\n

This was despite the group’s shareholders approving a US$15 million rights issue at an extraordinary general meeting (EGM) last week.

\n

ZHL group chief executive officer, Albert Nduna, said while the group would temporarily suspend plans to delist from ZSE until the rights issue was complete, he still stood by his earlier statements that stock market valuations were not “good for business and discourage custodians of shareholders shares from disposing a significant shareholding or raising money”.He gave the example of CFI, a listed firm in which ZHL is one of the biggest shareholders, saying its market capitalisation was close to US$17 million but ZSE was valuing it at about US$3 million. “What this means is that an investor can buy the whole company at US$3 million and can make a profit of up to US$14 million if they sell the company’s assets after an acquisition,” he said.

\n

“My job is to be custodian of investors and shareholders shares and to take a route or decision that would enable them to have higher returns. They (shareholders) also have to take
\nadvantage of such a decision,” said Nduna.

\n

ZHL last year lost significant value in terms of market capitalisation. For the interim period to June 30, 2014, Zimre lost US$718 725 from investments in equity instruments. Nduna said raising money using ZSE valuations, which had suffered due to a low share price, would result in less leverage for shareholders. The contextual framework of the stock market makes capital raising a major benefit of being listed, but locally listed companies have not been raising much capital because shares are depressed. ZHL shareholders last week approved the raising of US$15 million through a rights issue to strengthen the group’s capital base and subsequently increase its underwriting capacity.

\n

The approval means a total of 750 million new ordinary shares will be offered for cash at a subscription price of US$0,02 each to existing shareholders on a basis of one new ordinary share for every 1,041 ordinary share already held by existing shareholders registered as at January 30, 2015. NMB Bank will be the underwriter. The new ordinary shares will have equal ranking to all existing shares with effect from the date of issue.  The rights issue is expected to enhance liquidity. ZHL is also seeking to use the money from the rights issue to reposition its subsidiaries, both local and regional, to be competitive in their respective markets.

\n

The capital raising initiative is part of a three pronged initiative being employed by the group to turnaround its fortunes. Apart from raising capital, ZHL is undertaking a cost
\noptimisation and investment restructuring exercise. Since 2013, a total of 13 companies delisted from the bourse due to liquidity challenges that resulted in companies failing to raise money on the stock market and attracting new investors to inject fresh cash.

\n

A significant number of the delisted firms failed to meet the minimum listing requirements on the ZSE, an indication that the volatile climate that has dogged the bourse since dollarisation in February 2009 was deepening. Industrial counters, Apex Corporation, Cairns Holdings, Celsys, Chemco Holdings, Interfresh, Gulliver, Interfin, Lifestyle Holdings, Phoenix Consolidated, Steelnet and financial services firm, Trust Holdings delisted in 2013. Last year, PG Industries was suspended from the local bourse for failing to meet ZSE requirements due to a difficult operating environment. Low market valuation was the major reason Interfesh delisted from the bourse in December 2013.
\nCottco was also recently suspended after seeking provisional liquidation due to debt problems.

\n

The low valuation for listed companies has meant that companies are unable to raise meaningful funding to remain viable. Quoted entities have found it difficult to convince investors to
\ninject large amounts of capital when valuations using market benchmarks reflected a lower net worth to the firm’s potential, intrinsic and asset value. It would not be surprising if some quoted companies were contemplating delisting from the bourse this year as the wider macroeconomic environment remains dire. – FinGaz