BY FIDELITY MHLANGA
CRODODILE skin exporter, Padenga Holdings’ plans to diversify its business portfolio and venture into mining is set to boost the company’s export revenue and gather real assets, IH securities has said.
The Zimbabwe Stock Exchange-listed company revealed early this month that it was in the process of acquiring a controlling 50,1% shareholding in Dallaglio, which owns the Pickstone Peerless and Eureka mines, which are domiciled in Zimbabwe.
The brokerage firm yesterday said the transaction came against a backdrop of persisting economic adversities, including a shortage of foreign currency in the country.
“While the proposed transaction appears to be an unusual pairing, it is value accretive, as it diversifies Padenga’s concentration in crocodile farming and significantly enhances the business’ earnings while remaining purely export focused. With 79% of sales in 2018 being ultimately to one luxury goods brand in Europe, the croc-skin producer faces a significant client concentration risk. Product and customer concentration risk is exacerbated by the nature of Padenga’s core product, with receding water levels in Lake Kariba, currently at 24% of maximum capacity, coupled with increasingly unpredictable and extreme climate conditions, posing a threat to livestock farming,” IH said.
Recently, gold prices have benefited from a flight to safety in global markets.
“The price of gold has recovered from $1 200 an ounce last year to $1 500 an ounce now, with the momentum expected to remain. Padenga has the unique advantage of already holding a profitable foreign currency generating operation. The group’s current resources provide some scope to develop and grow the mining operation, with the prospect of an unbundling and separate listing of the mining operation once the economy stabilises. Thus, we believe this transaction is going to assist the croc-skin exporter to further garner real assets and increase export revenue, solidifying Padenga’s position as a hedge against the current local market conditions,” IH said.
The brokerage firm said in recent years, there has been increasing pressure from animal rights groups protesting the use of leather in the fashion sector.
The global movement, spearheaded by Chanel, which banned the use of exotic skins, started by exclusion of animal furs and it has seen some of the largest players in the global exotic-skin demand chain, such as Louis Vuitton, Fendi, Christian Dior and Marc Jacobs, tighten the criteria for exotic leather to improve animal welfare, environmental preservation and the working conditions of employees.