'Colcom profits to double'

HARARE - Innscor Africa’s meat processor Colcom is tipped to more than double its year to June 2014 profits to $4,8 million on the back of refurbishments and an expansion programme, analysts projected.

Colcom recorded a $2,2 million profit in the half year to December 2013.

Stock broking firm, EFE Securities (EFE), said Colcom’s interim performance was impressive and reflected the benefits of successful restructuring and realignment of operations with new and modern trends as well as horizontal integrations.

“Even in the face of the difficult economic conditions where others are reporting falling revenues and margins lamenting depressed demand, Colcom’s numbers reflected a complete opposite of trends in the bulk of the financials that have been coming in the recent reporting season,” said EFE.

The Zimbabwe Stock Exchange-listed firm posted a much improved half year performance with a $34 million turnover representing 13 percent growth relative to the comparable period.

Operating income went up 108 percent to $3,8 million while at $3 million profit before tax was up 89 percent. Tax charge stood at $788,799 resulting in after tax profit of $2,2 million, an uplift of 87 percent .

Basic earnings per share were 1,2 cents. The group declared a 0,4 cents dividend per share.

Its balance sheet increased to $40,6 million, up 8,9 percent, while the net asset value was $27,7 million having improved 7,3 percent for the year.

EFE noted that growing revenues and even faster growing margins indicated Colcom’s potential “more so coming fast on the heels of a significant management shake-up”.

“The company’s financial momentum in the half year suggests that the group should post full year revenues, earnings before interest, taxes, depreciation, and amortisation and profit after tax of $69 million, $7,6 million and $4,8 million respectively based on the first half growth and margins.”

“We believe the forecast will be very conservative given the expected capacity improvements at Colcom that will only impact fourth quarter numbers while there is the additional component of additional branches being opened,” said EFE.

Using the advisory firm’s combined trailing average price by volume and price earnings valuations, the forecast performance values Colcom at $58,2 million being a target price of 36,61 cents.

“Given the stocks limited free float we are very bullish on its potential to surpass this target price and the stock has traditionally traded at a premium to peer average valuation matrices, we therefore place a Buy recommendation on Colcom,” says EFE.

 

 

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