Zimbabwe-focused investment firm Cambria Africa believes its shares are trading at a discount of at least 67% on the London Stock Exchange (LSE), but is optimistic about the full value of its assets.
Cambria, in a trading statement for 2021, said it remains cautiously optimistic about realizing the full value of its assets, even beyond its net asset value (NAV).
“At this time, we believe there is still room to increase shareholder wealth through appreciation in the company’s share price to reflect, at a minimum, its net equity, who for all intents and purposes are debt free.
“This should bring the market valuation as of February 28, 2022 of 0.3752 US cents per share closer to the company’s current net asset value of 1.15 US cents per share, a threefold difference,” he said.
Cambria’s investments in Zimbabwe include Paysserv Group and Millchem. Payserv Group is Zimbabwe’s leading provider of payments and business process outsourcing services to the financial and related industries. The group comprises four business units, Paynet Zimbabwe, AutoPay, Loanserv and Softserv.
Millchem is one of Zimbabwe’s leading distributors of industrial solvents and metal treating products. The company was established in 1986 as Millpal and renamed Millchem in 2011.
The investment-focused firm said it remained poised to benefit from an upturn in the economy thanks to stabilizing market-oriented policies, which is expected to take hold in Zimbabwe.
“In the meantime, we will pursue various strategies to maintain and enhance shareholder value,” he said.
In the update, the company noted that its strategic goals in 2022 were to retain cash resources of US$1.65 million and achieve full value of US$1.35 million held by the Reserve. Bank of Zimbabwe (RBZ) as “Inherited Debts” or “Blocked Funds”.
“This asset has been depreciated in our accounts at official value until the RBZ honors this covenant,” the company said.
The company also aims to value $175,000 of Old Mutual shares at the current Johannesburg Stock Exchange (JSE) market value by repatriating these shares to the Johannesburg Register from where they were transferred to the Zimbabwe Stock Exchange (ZSE)
He said this transfer was based on the fungibility of the dual-listed shares. However, the fungibility of the multi-listed shares has been removed by action from the Government of Zimbabwe and acquiescence from Old Mutual plc and the shares continue to be suspended from the Zimbabwe Stock Exchange (ZSE).
According to the update, Cambria earned 0.03 cents per share in fiscal 2021, compared to a loss of 0.07 cents per share in 2020.
The company said that despite the turnaround in earnings, net asset value declined by US$79,000, from 1.18 US cents to 1.16 US cents per share.
“The decline despite the profit contribution was due to a decline in the $200,000 market valuation for the company’s commercial properties from US$2.3 million to US$2.1 million according to a report by valuation by Hollands made on January 27, 2022,” the company said.
He noted that as of February 28, 2022, total cash on hand stood at $1.5 million, including $1.330 million in Cambria’s accounts outside of Zimbabwe.
The company said it will continue to streamline its operations by reducing personnel and overhead costs — and maximizing shareholder value from remaining durable assets, intellectual property and cash.
Tradanet, a 51% owned subsidiary of Paynet Zimbabwe, which processes microloans for CABS, Zimbabwe’s largest construction company, is the company’s most profitable operation and the turnaround is driven by loan values and salaries that catch up with inflation.
Autopay – Cambria’s payroll operation saw revenue decline as Paywell granted non-exclusive licenses to several competitors, including former employees.
In FY2021, the company entered into a management agreement with Propay (Pvt) Ltd and established former account executives as independent contractors.
“This has resulted in significant cost containment and alignment of payroll executive incentives with those of Autopay.”
Millchem’s remaining business, the production of sanitizers and sanitizers, traded slightly positive.
Cambria said the sector was characterized by significant competition and ease of entry for several smaller players in the chemical industry.
“With the lower disposable income of the general population, high-quality disinfectants have lost market share. Our joint venture with Merken (Pvt) Ltd remains cash flow positive but is expected to end by the end of this fiscal year if demand does not improve,” he said.