FIVE private companies within the Innscor Africa Limited empire have expanded at a scale that could warrant each a stock market listing, one of Zimbabwe’s prominent advisory firms said last week.
In its Market Intelligence Report released on Friday, Morgan&Co predicted that it was possible the Zimbabwe Stock Exchange (ZSE)-listed Innscor was thinking along unbundling several of its key operations.
However, it was only waiting for the perfect time before rolling out a fresh wave of new public listings.
Companies list on stock markets to raise capital and expand operations.
Morgan&Co’s scenarios were also perfectly timed.
Zimbabwean businesses have struggled to access lowly-priced loans to run their operations in a volatile market with limited capital markets options.
In its comprehensive analysis of Innscor operations, Morgan&Co said, based on a trend spanning two decades, chicken producer Irvine’s Zimbabwe, Probrands and Associated Meat Packers Limited could be potential candidates for public listings.
Its report combed through the conglomerate’s footprint, its past behaviour and actions and also concluded that Innscor has gravitated beyond an ordinary investor and a venture capital outfit pursuing high growth businesses.
It said beyond its most immediate offspring, TV Sales & Home, the country’s most outstanding furniture operation and Dial-a-Delivery may also be earmarked for stock exchange listing.
TV Sales is a subsidiary of Innscor’s Axia Corporation while Dial-a-Delivery is a subsidiary of Simbisa Brands, another member of the sprawling Innscor empire.
Morgan&Co showered Innscor management with unrestrained praise and applauded them for pouncing on firms and unbundling them at the right time.
“The group is currently focusing on other operations which could be ripe for a listing once fundamentals in Zimbabwe improve,” the paper said.
“Potential transactions include unbundling Irvine’s Zimbabwe, Probrands and Associated Meat Packers Limited. In addition, the group stands to indirectly benefit from further unbundling of operations that it unbundled in the long term. TV Sales & Home, a subsidiary of Axia Corporation and Dial-a-Delivery, a subsidiary of Simbisa Brands are some potential opportunities that spring to mind,” it added.
Morgan&Co said it was seeing a continuing strategy that began 27 years ago when Innscor entered crocodile ranching through Astra Crocodile Ranching.
The firm was expanded, unbundled and listed on the ZSE in 2010 as Padenga Holdings.
The Padenga deal also helped Innscor build a war chest for funding other operations, the paper noted.
Padenga’s share price rocketed to US8 cents in 2014, from US5 cents on listing four years earlier.
“A similar restructuring was done with its quick service restaurant operations, which it unbundled under the name Simbisa Brands in 2015,” the paper said.
“Innscor listed Simbisa Brands at a price of US$15c per share and so much was the success of the unbundled business that its share price sky-rocketed to US68c per share in a space of two years. Axia Corporation, whose operations were nurtured since 1993, was unbundled from Innscor at an opening share price of US3c per share on ZSE. Within a year, the business was trading at US30c per share. There are many other instances that the business unbundled some of its operations in order to keep Innscor light and on a continuous growth strategy, which include the disposal of Spar Zambia and the tour operator Shearwater,” Morgan&Co said.
It said one of Innscor’s major achievements had been the ability to trim excess flesh but still remain strong enough to continue pouncing on new businesses and turning them around.
“This business has managed to balance between growth and size through a perpetual cycle of nurturing good businesses and unbundling them when they reach critical mass. Innscor … evolved from a quick service restaurant business. Innscor’s competent management has shown a track record of nurturing its businesses from the start-up phase of their life cycle to the maturity stage where they can unbundle them. The proceeds are then reinvested into newer and smaller operations with high growth potential,” Morgan&Co said.
But should Innscor decide to make new stock exchange listings, the capital markets terrain has changed. It stands to benefit from a hugely shifting capital markets space that constructs with the period when Padenga and Simbisa went public.
Today, the group will have to choose between two key domestic exchanges — the 126-year-old ZSE and its ultra-modern and strategically established offspring, the Victoria Falls Stock Exchange (VFEX).
The VFEX was launched two weeks ago, becoming Zimbabwe’s second bourse.
It trades in the US dollar only.