Simbisa ends ZSE listing drought

HARARE - Innscor Africa Holdings subsidiary, Simbisa Brands Limited (Simbisa), became the latest counter to list and trade on the Zimbabwe Stock Exchange on Friday.

Simbisa, which runs quick service restaurants in Zimbabwe and 11 other African countries, however failed to stimulate the local market that has been on a decline since the 2013 elections that saw President Robert Mugabe extending his rule on the country. 

Since then, the stock exchange — with 60 counters — has lost over $2,5 billion in market capitalisation as foreign investors are quickly taking their capital to other lucrative regional bourses.

To highlight the extent of the struggles on the ZSE, Simbisa in one day showed a turnover of $643 253, the highest turnover for the whole week. This represented 27 percent of the week’s total turnover of $2,3 million.

Simbisa’s shares started trading at 12 cents before rising to 15,1 cents and closed the day at 14,32 cents.

Market experts say Simbisa, which owns, operates and franchises the intellectual property rights of a basket of brands including Steers, Nando’s, Galitos, Pizza Inn and Chicken Inn, is well placed to benefit from any economic turnaround in the country.

In a pre-listing update, Lynton Edwards Stockbrokers (Les) said Simbisa was poised for a great take-off due to its recent restructuring exercise that included cost rationalisation through manpower optimisation, branch relocation and expansion.

“It has also undergone operational changes to improve productivity and efficiency leading to margin improvement across the board in the 2015 financial year. Given its strong presence in the Zimbabwean market, expanding branch network both in Zimbabwe and the region — now at 388 — and positive cash flows, Simbisa is well-poised to capitalise on opportunities for earnings growth,” Les said. 

The equities research company further noted that streamlining the company’s focus, core competencies, and enhancing of operational efficiencies would drive profitability in the outlook period.

“We do believe the company has a strong balance sheet and financial muscle that will it to be competitive and dominant on the market,” Les said.

By end of June 2015, the quick service restaurant firm had an asset base worth $62,7 million and made $153,1 million in revenue.

Les forecast Simbisa to register revenue compound annual growth rate of four percent in the 2016 financial year.

“We assume Simbisa’s earnings before interest, taxes, depreciation and amortisation (Ebitda) to increase by a compound annual growth rate of eight percent for the same period. Ebitda margins are likely to increase 300bp from 12 percent in the 2016 financial year to 15 percent in the 2020 financial year,” the equities research firm said. 

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