HARARE – Zimre Holdings Limited (ZHL) is seeking shareholder approval to buy back about 10 percent of the company’s equity.
The listed diversified conglomerate, which will hold its annual general meeting on June 28, 2017, is also proposing that the purchase price shall not be lower than the nominal value of the company’s shares and not greater than five percent of the trading price for the ordinary shares.
Zimre noted that the shares “repurchased may be held for treasury purposes or cancelled as may be decided by the board from time to time”.
Equities analyst Ranga Makwata said one of the common reasons why companies go for share buyback is to boost earnings per share (EPS), because share buyback reduces outstanding shares in the market.
“At times when the company feels the shares are undervalued, a share buyback is used to pump up the stock price, which acts like a support or new base for the stock,” he said.
Makwata further indicated that there could be a number of reasons why shares of a particular company are trading lower despite stable fundamentals.
“A buyback reassures investors that the company has confidence in itself and is determined to work towards creating value for shareholders,” he added.
Meanwhile, ZHL company secretary Sibongile Mhlanga said the group — which is planning to consolidate its regional operations under an entity to be listed in Botswana — was in a strong financial position and is in a position to repay its debts for the coming year.
“The directors are satisfied that the assets of the company will be in excess of its liabilities for a period of 12 months after the annual general meeting,” she said.
Mhlanga also noted that the group is confident that its working and ordinary capital will be adequate in the coming financial year.
This comes as the group, with interests in insurance, property and agriculture, recently indicated its intention to consolidate all regional operations under a single company called Emeritus International which will list on the Botswana Stock Exchange (BSE).
ZHL chief executive Stanley Kudenga in May told analysts that the group will hold at least 51 percent in Emeritus International.
The decision to list the company on BSE will enable it to raise funds without liquidity challenges faced in the local market.
“Emeritus International structure will be used as a vehicle to mobilise capital for group expansion and strengthening the regional foothold,” said Kudenga.
ZHL’s regional operations include the wholly owned Malawi Reinsurance and Zambian Reinsurance while it also has 91 percent in First Reinsurance of Botswana and Uganda Reinsurance where it holds 2,43 percent shares.
“We want to attain blue chip status and grow into an expansive and diversified investment group,” Kudenga said.