Old Mutual charms investors

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South Africa’s Liberty Holdings Limited is interested in acquiring First Mutual Holdings Limited

INVESTOR interest in Old Mutual stock was more pronounced in the month of November with foreign investors seeking to play the local market and those exiting piling into the stock.

Chris Muronzi

Market data shows that Old Mutual, a fungible stock traded on the Johannesburg Stock Exchange, London Stock Exchange and the Zimbabwe Stock Exchange, has been providing desperate investors the opportunity to move proceeds from the sale of securities, dividends, capital gains and principal in and out of the local market.

Zimbabwe, which adopted the use of US dollars in 2009, is experiencing a severe foreign currency shortage that has created a foreign payments backlog running close to US$1 billion and discount for the local unit as high as 350% against the greenback.

The counter played favourite to investors in the month and accounted for 20,37% of total turnover.

The market’s total monthly turnover stood at US$118,03 million.

Apart from its fungibility appeal, arbitrage investors tend to buy into the stock whenever a valuation discount presents itself.

Of late, foreign investors seeking to invest on the ZSE have also been buying the stock in other markets and offloading onshore at a premium to avoid the central bank’s controlled exchange rate of US$1:1 to the local currency.

The US dollar is trading at a premium of 350% against the local currency on the parallel market.

Analysts say this could also be part of the reason the stock accounts for the bulk of the trades on the ZSE.

Fungible stocks such as Old Mutual are currently experiencing strong demand.

This has pushed up the premium to both the JSE and LSE higher than the current local currency discount rate of 350% against the US unit.

Its valuations as at October 30 show there is strong interest in the counter. The stock had a price-to-book ratio of 4,35 and a price-to-earnings ratio of 36,23. This means Old Mutual was trading at a premium to its book value of 4,35 times and an investor had to pay US$36 for a dollar in earnings.

This is despite a dividend yield of 0,98. But in terms of dividend yield rankings in the period, Old Mutual was at the tail end of 20 counters with the highest yield.

Afdis shares worth US$22,5 million, Econet shares valued at US$20 million and Delta stock worth US$11,9 million were snapped up by investors in the month.

Turnover fell 22,37% at US$118,03 million with the average daily trades of US$5,37 million being realised during the month as the volume of shares sold in the same period fell by 51,33%.

A total of 153,88 million shares exchanged hands in November.

The most significant contributions to total value traded were Old Mutual, Afdis and Econet, contributing 20,37%, 19,27% and 17,36% respectively.

Total volume traded was down 51,33% to 153,88 million shares.

The stock market weakened in the same month, giving up 4,08% to close at a total market capitalisation of US$17,4 billion.

The industrial index was down 2,03% to close 538,66 points, weighed down by a 12,42% loss in Econet, offsetting gains in Delta, up 13,50% and Innscor up 6,87%.

The mining index fell 4,04% to close at 208,56 points with RioZim and Bindura registering losses of 5,26% and 1,13%, respectively.

The all-share index declined 2,09% to 160,40 points while the Top 10 Index lost 1,49% to 164,98 points.

The month’s top gainers were Rainbow Tourism Group, up 37,93%, First Mutual Properties up 25,57%, NMB Bank up 20%, ZB Financial Holdings up 19,34% and Delta up 13,50%.

The biggest losses were recorded in African Sun down 32,20%, First Mutual Holdings down 24,41%, Hippo down 23,88%, Meikles down 23,19% and Edgars down 20%.

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