What to expect in F17 earnings season

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Mamvura’s Market Minute
Are there any early conclusions to draw from the results that we have seen to date? Afdis kept up with tradition publishing first, second up was ZB — certainly a surprise and probably reporting at the earliest point ever in its recent history — while Zimplow, which back in 2006/07 often used to be the first company reporting full year end results, published on Tuesday.

Back in the heady days of hyperinflation, Zimplow benefited from reckless Aspef spending, and it would seem that is very much the case today, with the bonus being the incentive paid for exports. For companies that are already exporting, for example, Padenga, this windfall gain goes straight to the bottom-line.

What of ZB? It is hard for people in the rest of the world to fathom that in a country where you cannot get any meaningful amount of physical cash out a bank, revenues and profits would continue to rise in the industry.

Of course we know why this is the case. The increase in non-funded income, now comprising two thirds of group income, is a phenomenon seen across the sector — as is the continued rise in interest income, being made on the back of the TBs the bank is holding as opposed to productive lending. So no particular surprises here either. We should see the result replicated across this industry which has the lowest PEs — in ZB’s case 3,8 along with a dividend yield of 5 percent. Why is no one buying shares in banks!?

Finally good old Afdis. Given Delta’s outcome in Q3, it would be safe to say that to say that the majority of the performance that drove the 16 percent increase in revenue, came in the last three months of the year.

After all, Cecil told us back at the Annual General Meeting in November that volumes and revenue were “slightly below their targets”, which before the events that followed 10 days later, were probably “achievably realistic” given the environment. By “environment” we are talking about constraints on the forex front, which remain parlous.

Payables (read Distell), have nearly doubled and cash balances are up $9 million, which is why the banks are doing rather well redeploying these deposits.

Ultimately, given what we have seen to date and the expectation of the rest of the season, the ZSE is still to reflect post-November 15 events. The quality of the earnings in the banking sector are certainly not “traditional”, but financial institutions don’t have “payment problems” constraining their performances.

Even if Afdis makes 5 cents in the year, the PE at 29 and dividend yield of 0,28 percent continue to reflect share prices created by pre-November 15 hot money.

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