Infinitesimal trading activity ebbed the LuSE listed mining investment vehicle ZCCM-IH (ISIN:ZM0000000037) scrip 24% lower. The mining stocks yesterday (27 Nov.) plummeted to K28 from K38.5 per share as holders sold minimal quantities in yesterday’s trading.
‘This was a mere price discovery correction in pricing rather than an actual market event or information pricing, following inactivity in the mining stock. It is more of a true test of market illiquidity that would move an entire market from a market capitalization point of view using the new price levels of K28 per share. Only about 100 shares were sold offshore and this caused a 24% market capitalisation valuation loss on the traded ISIN,’ an unnamed trader narrated.
ZCCM -IH recently celebrated the successful takeover of the largest Amethyst mine, Kariba Minerals for a consideration sum of $2.5 million. The mining investment vehicle will now 100% control the Siavonga mine.
The mining investment vehicle is also dealing with legal redress issues exacerbated by one of its investee company’s Ndola Lime Corporation (NLC) following an application to the High Court by (2) NLC employees for compulsory winding up in light of extended financial distress.
Ndola Lime has been cited for financial distress and to date ZCCM-IH has invested over K1 billion ($84 million @K11.85/USD) in both debt and equity in the quest to yield a turnaround in operational profitability and efficiency of NLC.
By order of the court dated 05 Oct. an official receiver was appointed as Interim Business Rescue Administrator of NLC.
ZCCM-IH is seeking legal redress on the mentioned process.
Market Commentary
What we see is a sheer case of scrip illiquidity in ZCCM-IH. The stock is on the LuSE score board for barely 2-3 years post the sell down whose outcome was fairly dismal. The price has for a while been stagnant and has not been reflective of the company and market fundamentals. Primae facie, it would appear as the best performing stock with a strong beta coefficient but because of the illiquid nature of Zambian capital markets, market fundamentals have not been factored into the share price for it to trade at levels it would have if the market had been efficient according the efficient market hypothesis. ZCCM-IH is behind in its audited financial statements which should have effectively priced into the price. Suffice to say the current levels are overpriced to the extent that even small transaction will move asset valuation significantly. There are more sellers than buyers as investors look to exit and this sell off will breed price suppression pressure. ZCCM-IH is a state owned entity which we believe can proxy other listings expected starting 2019.
The SEC, LuSE and other regulatory authorities should rethink monitoring of these listed SOE’s or the capital markets risk having shell listings whose prices will not be reflective of fundamentals.
As at 11.49am, ZCCM-IH was trading for K28.5 per share.
****Edited by Tionge Mbali****
