HomeOpinionPiggy’s Trading & Investing Tips: Enter Datvest Modified Consumer Staples ETF

Piggy’s Trading & Investing Tips: Enter Datvest Modified Consumer Staples ETF

By Batanai Matsika

TUESDAYS and Thursdays are important days for foodies in Zimbabwe as they will be taking advantage of the “buy one and get one free offer” — which is a promotion by Simbisa Brands known as Terrific Tuesdays and Thursdays.

Chicken Inn and Pizza Inn are flagship businesses of Zimbabwe Stock Exchange (ZSE) listed Simbisa Brands, a Quick Service Restaurant (QSR) business with an established pan-African footprint in Zimbabwe, Kenya, Zambia, Ghana, Mauritius, Namibia, Swaziland, Malawi and DRC.

A common feature every Tuesday and Thursday at most Pizza Inn and Chicken Inn outlets are the long queues and packs of customers that will be waiting for their orders.

Piggy has consistently insisted investors on the local market to park Zimbabwean dollar (ZWL) balances in consumer-facing companies given the defensive nature of the sector.

In other words, one should put money where their mouth is. The good news is that getting exposure to the sector has been made a lot easier through the introduction of the Datvest Modified Consumer Staples Exchange Traded Fund (ETF).

On Thursday March 3, 2022, CBZ Asset Management listed the Datvest Modified Consumer Staples Exchange Traded Fund by way of introduction on the ZSE. The ETF constituents are made up of 10 stocks.

The asset manager has put in the initial seed capital in the form of scrip in the exact weights of the index. The objective of the fund is to give returns that track the ZSE Modified Consumer Staples Index (MCSI).

This implies that it is a passively managed ETF that tracks the performance of consumer staples on the stock market.  Piggy notes that investing in the Datvest Modified Consumer Staples ETF represents a more efficient way of tracking a given benchmark compared to investing in a basket of individual stocks.

Settlement charges that are levied per deal note are minimised by doing one transaction when buying or selling the ETF compared to multiple orders for the various underlying securities.

In addition, the outflow required to get exposure on the ETF is minimal compared to having to buy the individual underlying securities.

An analysis of the performance of consumer stocks as measured by the Morgan & Co Consumer Index reveals that the sector outperformed the overall market in 2021.

While sectoral multiples look demanding (Historic PER of 57.7x and Fwd PER = 30,7x), performance in the outlook period will be driven by the following fundamentals;

Strong GDP growth: The Ministry of Finance and Economic Development expects the domestic economic recovery to continue albeit at a slower rate of 5,5% versus 7,8% recorded in 2021. Piggy estimates GDP growth for Zimbabwe to be 4,5% in 2022.  Still, this growth should help sustain the demand of food and related consumer products.

Bottom-heavy demographics: Population expansion and youthful demographics provide significant tailwinds for growth. A high population growth rate has a large effect on the economy, especially on the composition of goods and services produced by the marketplace and the government.  In a developing country like Zimbabwe, the usual suspects will be the consumer-facing stocks given that these tend to be supported by demographics (population growth rate of c2.0% and a young population); and

Urbanisation and improved remittances: As we enter the electioneering season, infrastructure projects and various construction endeavours will take centre stage throughout 2022. Additionally, the construction sector is forecasted to grow by 17,4% in 2022 anchored by disinflation, a recovery in disposable incomes and the easing of lockdown restrictions.

These trends should generate demand for consumer products. In addition, diaspora remittances that hit an all-time high of US$1,4 billion in 2021 should help boost the demand for food.

All in all, it is a no-brainer as Piggy believes that the Datvest Modified Consumer Staples ETF provides a solid route to gain direct exposure to Zimbabwe’s consumer story.

  • Get more tidbits on the stock market by joining a PiggyBankAdvisor WhatsApp Group (+263 78 358 4745).
  • Matsika is the head of research at Morgan & Co and founder of piggybankadvisor.com. —  +263 78 358 4745 or batanai@morganzim.com/batanai@piggybankadvisor.com.

Recent Posts

Stories you will enjoy

Recommended reading

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

NewsDay Zimbabwe will use the information you provide on this form to be in touch with you and to provide updates and marketing.