AIM-listed LonZim Plc, Lonrho’s Zimbabwe investment vehicle, plans to raise $5 million from its initial public offering (IPO) on the Zimbabwe Stock Exchange (ZSE) this year, with an aim to acquire new interests in hotels, mining, telecoms and agriculture.
Through the offering, underwritten by Premier Banking Corporation and expected in the market during the current quarter, LonZim hopes to secure new funds to leap into the nucleus of Zimbabwe’s recovery.
The shares will be fungible between the ZSE and AIM.Amstel Securities, an investment research firm based in Netherlands, predicts the IPO will be over-subscribed with the largest interest likely to come from mutual funds and other cash-rich institutional investors, while its local market cap is likely to be discounted by about 58% of its tangible net asset value (NAV).
The LonZim share price currently stands at 27,5 pence. In fair value terms, the company’s tangible assets are worth 45,7 pence per share and has a market cap of just £9,2 million on AIM, against an issued share capital of £33,45 million.
Tangible NAV refers to a company’s equity below which the market cap should not fall.
The research firm bases its simulations on Zimbabwe’s country risk discount factor, which in its view is overstated, but likely to correct gradually as investor interest returns.
“The possible secondary listing on the ZSE will be welcomed by the Harare investment community,” Amstel said.
“Local pension funds are likely to be interested in investing in LonZim as the 58% discount to tangible NAV of LonZim (is) a too high a discount for Zimbabwe’s country risk.”
LonZim’s IPO on AIM in December 2007 raised £28,7m, while a follow-on rights issue two years later raised an additional £1,17 million.
Through the capital, the investment company has acquired interests in eight operations, six of which were in Zimbabwe, namely Celsys Limited Zimbabwe (60%), ForgetMeNot Africa Limited Zimbabwe (51%), Paynet Zimbabwe (Private) Limited Zimbabwe (100%), Leopard Rock Hotel Company (Private) Limited Zimbabwe (100%), Millpal Chemicals (Private) Limited Zimbabwe (100%) and Fly540 Zimbabwe (Private) Limited Zimbabwe (90%).
Amstel asserts that the majority of LonZim’s Zimbabwe subsidiaries will be “cash-flow positive by the end of calendar year 2010”.
LonZim hopes to acquire new interests in high-growth industries and state-owned enterprises in which government plans a roll-back and expand its portfolio of investments beyond four, taking advantage of new opportunities springing out of Zimbabwe’s recovery.
The country’s economic recovery started last year after its leaders took two landmark decisions – to “dollarise” and form a unity government, reversing a decade-long downturn.