Econet shares ‘undervalued’

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ECONET Wireless Zimbabwe (Econet)’s shares are currently undervalued resulting in low trading activities, said capital markets evaluator Akribos Research Services (Akribos).
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 believe that the fact that Econet is currently undervalued means that patient investors are not willing to offload at current levels,” she told The Financial Gazette in emailed responses.
“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 while Cassava closed at RTGS$1,11. Akribos says it has a target price of $2,09 for Econet.
Following the demerger, which Econet says is meant to unlock shareholder value, Cassava now houses EcoCash, Econet Insurance, Econet Life and Steward Bank while Econet’s business model has pivoted to telecommunications and media.
“From a buyer’s point of view, the growth story of Cassava has generated interested with Ecocash, which is now the market leader in the mobile money space, registering a 215 percent year on year growth in transaction values during the first half of 2019 while the digital bank Steward achieved 103 percent growth in net income resulting in triple digit topline growth,” Nyaungwa said.
Cassava’s financial statements for the year ended February, 2018, which were extracted from the group’s results, show that the technology segment’s profits made up 53 percent of the Econet’s reported $132 million 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$3 billion, has regained its position as the highest capitalised counter on the local bourse after Cassava had temporarily assumed that position amid the hype of its initial listing. With a market value of RTGS$2,88 billion, Cassava is now the third most capitalised counter on the market, after Delta, RTGS$2,92 billion. newsdesk@fingaz.co.zw