One common way to make money on the stock market would be to bet on a roaring rebound in the local economy as aggregate demand improves and pushes up top and bottom-line figures of listed companies Here it is Buy stocks based on some positive potential transactional or M&A activity going on and always follow where the “big and smart money” is going Good case studies on the Zimbabwe Stock Exchange (ZSE) include the likes of Meikles Limited, ZB Holdings and First Mutual Holdings
Of course, share prices of these counters have already rallied but here is the next alpha bus you will not want to miss; Dairibord Holdings The dairy processor has issued several cautionary announcements indicating that it is in merger and acquisition negotiations with Dendairy Private Limited The negotiations with Dendairy were first announced in July 2020 Dendairy is a producer of dairy products and fruit juices in Zimbabwe and it is envisaged that a successful conclusion of the discussions could lead to improved raw milk production for Dairibord Holdings while also boosting foreign currency earnings
The transaction will also consolidate Dairibord Holding’s dominance in the local dairy market On the Zimbabwe Stock Exchange (ZSE), the share price has responded but we believe there is still room for further upside When evaluating the Dairibord opportunity, the following points should be considered;
• The Zimbabwean dairy industry is failing to meet local demand There is a deficit of c60 million litres of milk per annum
This is because the local industry has dropped production numbers consistently since the year 2000 while the national demand has remained high (c120 million litres) The country has c19,000 milking cows currently against a peak of 119,220 in the early 1990s These constraints are the reason why the combined entity has a viable opportunity to increase production and introduce new products at a minimal risk level;
• The Zimbabwe per capita milk consumption is very low Around 2000, milk consumption per capita for Zimbabwe was 28.6 litres per person
This has dropped to 8 litres due to economic constraints Population growth of c2.0% p.a is also expected to boost demand In our view, this presents a long term growth opportunity for the dairy processor;
Source: Businesstimes
