Tapiwanashe Mangwiro
HARARE – The year is one to forget for Econet Wireless Zimbabwe as the telecommunication company saw off many battles including ones it was exposed to through its subsidiaries. The company like many others was hit by inflation and currency depreciation and devaluation in March, but unlike businesses in other sectors, it was not able to adjust prices at the snap of the fingers due to regulatory procedures.
Previous week performance
After weeks of struggling for direction post its Q2 trading update, Econet finally took off in the positive direction after it released its HY21 results in which it reported a financial loss due to foreign exchange losses amounting $2.1 billion. Such news triggered the company to be noticed by investors who believe the exchange losses are not actual losses as the company would have used the money when it still had probably 80% of its realised value.
As a result the stock gained 63.74c or 9.81% in the week from a share price of 649.98c at the opening of the week and closed at 713.72c at close of the week. A total of 9.4 million shares worth $64.9 million of the company were traded in the previous week.
Future Prospects
Company earnings are most likely to improve in the FY21 as the company still has the leeway to hike its fees in a stable environment. Electricity problems are now at a minimal and this will most likely result in the company saving big on diesel costs for its substations. DPA continues to make inroads in the continent and the company will most likely continue to pump in the much needed foreign currency in the Group’s financials.
Valuations
Econet has a market capitalisation of $18.14 billion as at close of last week, and total assets of $56.97 billion as at HY21. This implies that the company is currently undervalued in terms of its assets and still has a room for share price growth to match the asset base of the company. EPS indicates how much money a company makes for each share of its stock and Econet currently makes 4.20 per each share. In terms of price growth, the telecoms giant lags behind market average of 750% as it has a year-to-date gain of 380.77% and a 52-week gain of 375.68%. The NBV valuation shows that it is trading at a discount of 234.94% at the current price of 713.72c.
The company has an earnings yield of 58.8%, meaning that the investor has earned $58.80 for $100 worth of shares owned, and a dividend yield of 0%. The company lagged behind other blue-chip companies due to its exposure to the investigation in Cassava on allegations of money creation. This led to a cautious approach by investors and since the release of the results, the company has brought the confidence back and we anticipate a late rally by the company in the current month.
