THE Cement producer’s shares have been swimming upstream for two months since the initial announcement was made on 26th October on a proposed acquisition by Scancem international of its majority shareholder AfriSam.
At the date of the announcement 26th October, Tanga cement share prices were trading for TZS 410 per share, gaining 192 per cent at market close on Friday 17th December to reach TZS 1200.
Scancem International DA (Scancem), a subsidiary of Heidelberg Cement AG, which owns Twiga Cement seeks to enter the Tanzanian market a move that will indirectly place Heidelberg Cement in the forefront of the cement market share in Tanzania by both production capacity and output through its double presence in Twiga and Tanga Cement.
The two companies Twiga and Tanga Cement are both listed on the Dar es Salaam Stock Exchange (DSE) however in terms of performance for they are poles apart, with Twiga Cement reporting growth in profit after tax for 4 years in a row, a fate dissimilar in Tanga Cement that has recorded net losses in four years running since 2017 subsequently failing to pay dividends to its shareholders.
What may be impacting the share price?
Afrisam that currently holds 68.3 per cent stake in Tanga Cement received an offer to buy its stake for an indicative price of TZS 3,157 per share.
In a statement released by the company, if the Acquisition becomes unconditional and is implemented; Scancem will acquire control of the company.
If this occurs, Scancem will, after the final Acquisition Price is determined, make a general offer to acquire the remaining shares in Tanga (“the General Offer”).
Excitement about the deal in the market, which the press release by the company disclosed could be worth TZS 137 billion, pushed share price from TZS 410 since the initial announcement was made to TZS 1200 at the time the market closed on 17th December adding TZS 47.76 billion to its market capitalization which rose to TZS 76.41 billion during the timeframe.
However the company put forward a word of caution to its shareholders when dealing in their Tanga Cement shares as there can be no certainty that all Conditions will be fulfilled or waived timeously making the success of the acquisition still subject to conditions, and therefore there is no certainty that the General Offer will made.
This year has been quite a rollercoaster for Tanga Cement Shareholders with three released cautionary notices impacting the share price of the company.
The first cautionary notice issued on 26th March this year disclosed that the company has experienced and improved performance such that the loss per share for the period ending December 2020 will be between 75 per cent-85 per cent lower compared to the period ending December 2019.
As expected the news resulted in an upsurge in demand for Tanga Cement shares with more than TZS 118 million worth of shares traded within the first month after the announcement.
The Second cautionary notice was issued on 28th September 2021, with the company disclosing that it expects that its loss per Share for the period ended 30 June 2021 will be between TZS 120 per share and TZS 127 per share, being between 45 per cent and 55 per cent higher than its Loss per Share of TZS 82 per share for the six months ended 30 June 2020. Following the disclosure the announcement prompted a missive sell off spree in the exchange.
One month after the second cautionary notice, the company issued its third cautionary notice on 26th October, disclosing Scancem International and AfriSam Mauritius Investment Holdings Limited have finalized the terms upon which Scancem will acquire 68.33 per cent of the issued share capital of Tanga Cement.
With the acquisition subject to the fulfilment of a number of conditions precedent. Inevitably the release of the cautionary notice caused an upsurge in demand for Tanga Cement shares with investors eyeing the indicative General offer of TZS 3,157.
Of which the company has cautioned materiality uncertainty exists on the final offer, so caution should be exercised when dealing with Tanga Cement shares.
Future outlook
We do expect increased activities in Tanga Cement shares between now and the acquisition finalization date, pinned to be early second quarter next year, however we do foresee a future stall in the share price as existing shareholders would have gained a considerable addition in their share value deeming comfortable for them to sell and on the other hand new investors will be hesitant in buying the stock as it reaches within ranges of the indicative acquisition price of TZS 3,157.
General Market Outlook
The DSE equity market continues its positive momentum, closing off the week ending 17th December with a bullish turnover of TZS 2.83 billion, which is 216 percent higher than the week before. With trading counters CRDB counter with 72.22 percent of the market share, followed by SWISS at 11.06 percent, TBL at 7.80 percent and lastly NMB at 2.89 percent.
Our view of the market leans favorably to equities that have good quarter 3 earnings results, as it has recently been the highlight of previous weeks we expect to continue to see more activity for companies that have released their quarter 3 earnings and those that have declared, with majority recording profits perhaps as the country continues to bounce back from the perils of the COVID 19 crisis suffered last year.
Fixed income Outlook
Appetite for short-term bills returned as both the 91 and 182- day bills were subscribed after a run of auctions without any subscription. The weighted average yield of the 364-day bill climbed for the successive auction to reach 4.89 per cent from 4.64 per cent an increase of 25 basis points, the 182 day bill also gained 47 basis points closing at 3.51 per cent from 3.04 per cent recorded in its last auction in October
– Mr Masumbuko is the CEO of Zan Securities a capital markets and securities authority licensed dealer and a member of the Dar es Salaam Stock Exchange (DSE).