Barbican Asset Management

Taking Stock – Low money market rates fuel equities bull run

THE stock market has continued to break through record highs as it has gone past the 700 000-point mark. While the release of results by companies partly e

xplains the current bull run, inflationary pressures remain the major driver of the stock market.


Buying pressure continues to push prices of counters upwards as investors take positions in search of positive returns.


The stock market has however been characterised by misjudgements on results of companies and this has increased the volatility of affected counters as the market is found revising its judgements.


With money market rates still pinned below 100%, investors continue to shun the money market by going into stock, forex and property markets.

This week we look at some of the major movers in the stock market.

Century


After posting $2,3 billion in its half-year results, a 378% increase from $487 million the previous year, the market felt that Century had underperformed.

This was in comparison with other counters in the same sector such as Kingdom and Trust which managed to grow their profits by 564% and 817% respectively. This saw the counter tumbling by $14 to close at $16 the day after the release of results.


That could have been over-punishment on the counter as it has since recovered and is on the upside and trading at an average price of $25.

The market could have over-reacted to Century’s results and a price of $16 made it one of the cheapest in the financial sector hence generating buying interest.


NMB


The market has been kept guessing on the results of NMB for too long. This has seen the counter swinging by big margins on a daily basis as the grapevine comes with new information. The counter traded at $265 on Monday only to close at $200 on Tuesday and $210 on Wednesday.


Barbican


The Zimplats deal has kept Barbican afloat. Since the publication of the deal, the counter has leapt from $65 to close at $85 on Tuesday.


Fidelity


The Century story is likely to be repeated at Fidelity. The counter fell by $5 on Tuesday to close at $13 after it released its half-year results that the market perceived to be below expectations. The counter is however on a recovery path, closing at $14,25 on Wednesday.


Interfresh


Interfresh reported a turnover growth of 500% with EPS growing by over 600%. This saw the counter jumping by 50% to close at $155. Exports are on the upside for Interfresh and their earnings are likely to be higher for the final half of the year. The counter is likely to firm even higher. It is rated a buy in our books.


Natfoods


After declaring a half-year profit of $7,9 billion this year compared to $729 million during the same period last year in historical terms, the counter went on a rise. During the week under review, the counter gained $300 to close at $1 800 on Tuesday.


Despite the deteriorating economic fundamentals, the company has continued to do well. This is commendable especially given the difficulties in the agricultural sector. The gradual death of price controls is however likely to see the earnings of Natfoods remaining on the upside.


Cafca


Exports, which currently make up more than 65% of the total order book, are the major driver of earnings for Cafca. While domestic sales are likely to continue shrinking, exports earnings will compensate for business lost on the domestic scene.


The growth in earnings is likely to be affected by the continuous weakening of the Zimbabwe dollar as indicated by the soaring parallel forex market rates. In our books Cafca is rated a buy.


Ariston


Ariston is a leader in the horticulture business. It has the bulk of its earnings in forex and this has transformed the group into a “cash cow” for investors.

At the current market price, we view Ariston as cheap hence worth buying.

In the mining sector, counters have maintained the upward rally. During the week under review Falgold moved $100 up, Bindura $700 while Ashanti and Wankie have remained unchanged.


Bindura, which was among the highest dividend payers last year, is now viewed as a dividend stock hence demand for the stock has soared.

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