Hidden positives spur interest in Imara's big Zim event

A spate of under-reported positives is fast turning the latest Zimbabwean investment conference into a much-awaited event with strong pulling power for some seasoned international investors.

The Harare indaba is organised by Zimbabwe's leading stockbroker, Imara Edwards and Group colleagues at Johannesburg-based Imara Africa Securities.

Participation at the annual event, being staged from May 27 to May 30, is by invitation only. Positive response from those on the invitation list confirms that many investors have developed in-depth knowledge of African frontier markets in general and Zimbabwe in particular, says Tino Kambasha, executive director of Imara Edwards.

"Superficial understanding of the Zimbabwe market suggests there is little to get excited about," he notes. "But a deeper assessment reveals significant opportunities.

"Zimbabwe remains on the 'watch list' of many asset managers. They are well equipped to uncover the hidden positives. The conclusion appears to be that some deep value opportunities exist in our market; not only in the listed space but in the private equity arena."

Factors underpinning international interest include…

Company performance and potential: some Zimbabwean blue-chips are doing well, with suggestions there could be more good news to come.

In the agri-business sector, Ariston has benefited from a cash injection by its Afrifresh parent. Big volume increases appear imminent. Tea production could soar 250%, according to an Ariston report-back to shareholders. Macadamia nut production may rise 77%.

Meanwhile, BAT Zimbabwe reportedly expects its own volumes to rise in 2014. Cash generation is so good, the company has repaid outstanding debt.

Over at Barclays Bank Zimbabwe, pre-tax profit is up 70%, net profit is 40% higher and the loan book is 28% bigger.

Timing considerations: Zimbabwe's long-term economic cycle is set to hit a low in 2014, say some commentators. Those who time their entry well could get in at or near the bottom.

The 'sling-shot effect': Big market moves involving global funds tend to be overdone. A sell-off often goes too far, depressing valuations to levels from which they could bounce back strongly. Earlier in the year, Zimbabwe was affected by a foreign sell-off.  Kambasha believes foreign investors simply moved to the sidelines and will look to exploit value opportunities as the realisation grows that foreign selling went too far.

International rethink: The International Monetary Fund plans to reopen its Zimbabwe office. The European Union has already lifted most of the sanctions aimed at President Mugabe's government. More positive perceptions may prompt a change in investor sentiment.

Says Kambasha: "These factors indicate that Zimbabwe deserves a closer look. It also explains why so many international delegates put the Imara investment conference high on their agenda.

"We see positive response in particular from Europe, but also from America, Asia and South Africa. Strategic interest in Zimbabwe and sub-Saharan Africa has not waned. Long-term positives may have been obscured by headlines about capital flight from emerging markets, but they're still there.

"Demand for places at Imara's Harare conference confirms it."