“Sleeping beauties” have begun to rise on the ZSE, as the market see resurgence in prices of shares previously shunned by investors for a variety of reasons. A “sleeping beauty” is generally a company that is considered prime for takeover, but has not yet been approached by a potential suitor. The term is typically used in relation to mergers and acquisitions. Imara Edwards Securities managing director Tedias Kasaira told businessdigest the ZSE was still harbouring many such counters.
— Staff Writer.
“Indeed there is some latent value in a number of counters on the ZSE. One will see pockets of value in the financial services sector and Zimbabwe’s listed property companies, which in my view remain largely undervalued due to exogenous economic factors,” Kasaira said.
Whilst the mainstream index has been driven mainly by interest in the blue chip counters such as Delta, Econet and Innscor among others, a number of companies’ share prices have lagged behind, resulting in them being noticed only in recent weeks.
Kasaira said a number of financial services companies were trading at prices significantly below their intrinsic values and would be prime targets for acquisitive mergers in the near future. This was because they had large untapped cash reserves, undervalued real estate assets, an undervalued share price, attractive assets, including brand strength or strong growth and earnings potential. Such companies become attractive targets for takeover or acquisition and are typically characterised by the purchase of a smaller company by a larger firm.
The acquiring company will typically offer a cash price per share, thereby purchasing the target entity outright for its own shareholders. The acquisition target might be a relatively new company that exhibits immense future potential which might not have been noticed, a well-established company that has either not been managed well or has suffered some misfortune and is therefore not maximising its potential. “Sleeping beauties” will therefore lie wait until a suitor comes around, at which point the company theoretically would be able to live up to its potential. “Sleeping beauties” will not wake up on their own but generally require a suitor, typically a larger company with financial resources and expertise to unlock the potential of the target company
Most analysts believe the takeover late last year of Tractive Power Holdings(TPH) by Zimplow limited will potentially unlock the value that was trapped in TPH. The market also saw earlier last year the conclusion of an investment by Afrasia Banking Group through an acquisition of a 35% stake in Kingdom Financial Holdings to create a new entity, Afrasia Kingdom Holdings. Prior to this transaction, Kingdom Bank was struggling to regain its foothold following a fallout with Meikles Africa, which led to the early dissolution of its unhappy short marriage to Meikles Africa.
Foreign investors recently snapped up equity in NMBH, with Nowergian investment fund Norfund, joining hands with FMO , a Dutch investment group and Afrivest Fund to inject a combined US$14,8 million into NMBH.
Another banking group, Trust Holdings Ltd, is reportedly in a successful courtship with foreign investors who have been attracted by the bank’s immense potential.
While Trust’s share price has surged 250% to 70 US cents per share, its total market capitalisation of just over US$2,5 million does not reflect the business’s underlying value. — Staff Writer.