As mining prospects brighten in Africa’s second largest copper producer, energy is set to take a positive cue from higher production targets and above all healthy metal prices on the London Metal Exchange. These two booming sectors are driving the capital market performance stronger by all standards. One recent development was the record interim dividend payment announcement that priced into the Copperbelt Energy Corporation (ZM:ISIN0000000136) stock sending it into a 13.23% two day rally to K4.00. This not only makes the power and energy distributor the largest listed company on the Lusaka Securities Exchange as measured by market capitalization but soared the Zambian bourse’s All Share Index to a new high.
According to stock exchange news release CEC plc board on Wednesday, 24th August 2022, approved the payment of an interim dividend of US Cents 3.0999 per ordinary share, which translates to K0.4995 per share. The dividends will be payable to shareholders on Friday, 28th October 2022.
Bigger than ZCCM-IH in market capitalisation
CEC stock rally scaled the energy distributors market capitalization to K6.5 billion surpassing ZCCM-IH (the state mining investment vehicle) at K6.11 billion. This one day spike cumulated the stocks appreciation to 50% year to date with the LuSE ALSI currently at 7,211 representing an 19% YTD appreciation.
1H22 top line grew 12% as demand ramps up
Unaudited financials reveal a 12% revenue growth to $182.3 million while EBITDA scaled 11% higher to $52.6 million as after tax profits were 18% firmer at at $30.2 million. The power transmitter and distributor has a health cash position from operations which rose 16% to $38.4 million.
“I am pleased that these half year results are being released against a backdrop of an improving business environment more supportive of private sector investment. From improving macro-economic conditions to noticeable efforts by the government to deepen dialogue between the public and private sectors through multiple approaches including the Public Private Dialogue Forum,” CEC Managing Director Owen Silavwe said.
A political shift, the BSA and decarbonization are spelling stock bulls for CEC stock
CEC Plc is a testament of subsiding political risk factors, following change of governance regime in August 2021, that saw reversal of an earlier imposed statutory instrument SI57 which prescribed for that state owned utility to hold common carrier status of transmission lines. This was an impairment cost of circa $90 million on CECs balance sheet in 2020 but was released in FY21 as politically induced credit risk factors subsided. Other drivers of the bullish prospects include signing of a the bulk supply agreement after a two year divorce with state utility ZESCO Ltd. The BSA spells stability of energy supply to the mines. Associated with the mines is the commitment from Konkola Copper Mines to dismantle the $150 million debt owed to the distributor.
The global decarbonization drive interventions are also set to give the energy distributor a positive cue from charging port demand over and above the 95% power demand to 2040 spelt by the recently published EMR capital cost of service study. The electric battery manufacture boom will the biggest driver of future energy generation which the distributor has invested through solar farms.
The Kwacha Arbitrageur
