Investors crushing on Proplastics

When Proplastics Ltd made its debut on the Zimbabwe Stock Exchange (ZSE) three years ago, it was not seen becoming a hot stock.

By Kuda Chideme

Just like plastic, a business of making it seemed a bit dull and generally uninteresting.

Fast forward to now, the counter, which was spun off Masimba Holdings Ltd, has become one of the best performing counters on the ZSE with its share price growing more than four-fold from two cents when it made its initial listing to the current 9,8 US cents.

On a year-to-date basis, the stock has been a hit with punters growing some 29%, outperforming the ZSE’s all share index up only 13%.

As of Wednesday, the company was valued at US$24 million on the ZSE from US$4,9 million.

As at 30 May, the stock had a price-to-book value of 1,88. This means the counter was trading at a premium of 1,88 to its book value and a price-to-earnings (P/E) ratio of 14,55. With a P/E of 14,55, investors were paying US$14,55 for a dollar in Proplastics earnings.

Proplastics was ranked eight out of 61 counters with a dividend yield of 3,25% and was among the priciest stocks by P/E valuation. A dividend yield is seen as a return on investment by some shareholders.

Analysts say this could have helped drive the share price. Its financial numbers too are looking good.

In the first four months of the year to April, Proplastics reported an 86% surge in revenue ahead of the same period last year driven by a 50% increase in sales.

The year is promising to be a good one with profitability for the four months already 2,5 times higher than that recorded in the previous half last year.

The company also has an impressive gearing ratio, after having paid off most of its debt obligations. As at December 2017 total borrowings were at US$375 000 compared to US$916 000 last year.

Proplastics has not only managed to grow under difficult circumstances but it has shown a rare ability to remain resilient in the face of shocks. Like every other company in the country, Proplastics, has been facing gaps in its product supply as a result of the ongoing foreign currency shortages.

The company singled out the lack of foreign currency as the most pressing hindrance to its operations. Typical of manufacturing firms most of the company’s components and critical inputs are imported.

Analysts see an upside when the economy normalises and access to foreign currency is no longer constricted.

Going forward, analysts suggest that the company is on solid footing given the firm demand and its growing product range.

Proplastics is expected to benefit from the renewed interest being shown in agriculture and mining. The company stands to cash in on current and future housing infrastructure developments.

Another fact that makes Proplastics attractive is that it has fairly new machinery which was commissioned in 2016. It is also in the process of upgrading its factory, a development which will improve efficiencies and result in a reduction of production costs.

In the first four months of the year to April, Proplastics reported an 86% surge in revenue ahead of the same period last year driven by a 50% increase in sales. The year is promising to be a good one with profitability for the four months already 2,5 times higher than that recorded in the previous half last year.

The company also has an impressive gearing ratio, after having paid off most of its debt obligations. As at December total borrowings were at US$916 000 compared to US$375 000 last year.

Proplastics has not only managed to grow under difficult circumstances but it has shown a rare ability to remain resilient in the face of shocks. Like every other company in the country, Proplastics, has been facing gaps in its product supply as a result of the ongoing foreign currency shortages.

Top