Capital Markets Evaluator Akribos Research Services (Akribos) says Econet Wireless Zimbabwe (EWZ)’s shares are currently undervalued resulting in low trading activities.
This comes as Cassava Smartech Zimbabwe (Cassava), which demerged from the telecommunications giant in December 2018, is experiencing increased trade activity on the local stock exchange and its shares have for the most part outperformed shares of Econet in terms of turnover.
The listed financial technology firm’s shares worth RTGS$1 billion have traded hands during the five trading sessions to March 20, compared to about $600 000 value traded in Econet during the same period.
Fungai Nyaungwa a senior associate at Akribos said traders’ reluctance to sell ‘undervalued’ Econet stock had caused the imbalance.
“While there is currently selling pressure in both counters, from a selling perspective we that the fact that Econet is currently undervalued means that patient investors are not willing to offload at the current levels,” she said.
“On the other hand Cassava for which we have a RTGS$1,20 target price has been trading more as investors take profit since the listing hoping to snap it up at cheaper levels”
By the end of Thursday last week, Econet stock was trading at RTGS$1.20 whilst Cassava closed at RTGS$1.1.
Akribos says it has a target price of RTGS$2.09 for Econet. Following the demerger which Econet says is meant to unlock shareholder value, Cassava now houses EcoCash, EcoSure and Steward Bank whist Econet business is pivoted toward telecoms and media.
From a buyer’s point of view, ‘The growth story of Cassava has generated interest with EcoCash which is now the market leader in the mobile money space, registering a 215% year-on-year growth in transaction values during the first half of 2018, whilst Steward Bank achieved a 103% growth in net income resulting in triple digit top line growth.”
Cassava’s financial statement for the year ended Feb 2018 which were extracted from the group’s results show that the technology segments profits made up 53% of Econet’s reported $132m profit after tax. ‘While we anticipate a slowdown in the growth of Cassava, the company’s prospects remain positive,” Nyaungwa added.
Meanwhile, Econet which now has a market value of RTGS$3billion has regained its position as the highest capitalised counter on ZSE after Cassava had temporarily assumed that position amid the hype of its initial listing. With a market value of RTGS$2.88B, Cassava is now the third most capitalised counter on the market after Delta with RTGS$2.92B.