ZECO shareholders play long game

ZECO Holdings (ZECO) shareholders seem to be holding on to the struggling engineering firm’s stock, despite its extremely infrequent trades on the Zimbabwe Stock Exchange (ZSE).
According to official ZSE data, the company’s shares have only traded on 10 instances over the past five years.
In comparison, most counters have traded more than that on the bourse since the beginning of the year.
This comes as the share price of the company — which has been incurring losses since dollarisation in 2009 — has over the years deteriorated to 0,0002 cents, giving the company a market capitalisation of a paltry $93 000.
“Shareholders are not willing to sell their holdings at the current prices,” said an equity analyst who preferred anonymity.
“It is not that there have not been any bids for the company’s shares, if you look at the online trading portal today, you will find open bids but there have not been any sellers,” the analysts said.
“The value that someone is willing to pay for a company that has not made a profit for a decade is very low, as you would expect, this is why this particular counter has not seen much action,” he added.
Zeco’s financial statements for the half year ended June 30, 2018 show that the company had net assets of about $20 million.
This means that its stock is technically undervalued by a factor of 99,5 percent.
The company says it is courting new investment and rolling out new products in anticipation of better fortunes under the “new dispensation”.
Its flagship arm, Delward Engineering (Delward), has not had significant projects since 2009.
The Bulawayo-based unit relies on infrastructure projects, which the company says have been few and far between in recent years.
The company is, however, optimistic that “the revamping of the railways will positively impact on Delward’s performance”.
Phillip Chiyangwa, ZECO’s board chairman, says the company has seen some performance improvement in its other subsidiary, Crittal Hope, during recent times.
He said the subsidiary’s performance was, however, affected by foreign currency shortages, adding that it is envisaged the subsidiary will perform better going forward.
“The industry was affected by increasing cost of raw materials due to foreign currency shortages. Positive performance is expected in the future due to a further improvement in the political and economic environment,” he said in a statement accompanying the company’s financials.
The company plans to roll out new product lines that will include handy tools and farming implements.
Over the past decade, the company has made headlines for all the wrong reasons.
It has been in the spotlight as one of the worst-governed companies on the ZSE and has been suspended from the bourse for not paying listing fees and failing to convene annual general meetings.
ZECO, however, seems to have weathered the storm and shareholders hope that an economic recovery comes soon and, with it, a silver lining.
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