CFI Holdings fight is about potential

HARARE, August 14 (The Source) – Major shareholders of CFI Holdings have been fighting over control of the agro-industrial group because of its potential to become one of the blue chip stocks on the local bourse, analysts have said.

“If you look back 10 years ago, you will find that CFI used to be a blue chip company. It was one of the best stocks on the ZSE and was in a sector that most investors are interested in. Its only that in the past decade it has been run down,” an analyst with a leading stockbroker said.

This potential is fuelling the fight between Zimre Holdings and British tycoon, Nicholas van Hoogstraten.

So, it came to pass that the Zimre Holdings controlled Stalap Investment’s offer to CFI minority shareholders of 22 cents per share — which at the time was higher than the share price of 18 cents then — flopped with no takers after van Hoogstraten’s Messina Investments poisoned the waters, offering 46 cents instead. The share price has shot to 61 cents as of Friday.

Stalap holds 41 percent shareholding in the agro-industrial group, while van Hoogstraten cobbled together a consortium of shareholders that control a 42 percent stake to counter.

He urged the minorities to ignore the Stalap offer, and volunteered to pay for the cost of transacting with him.

van Hoogstraten launched an attack against Stalap which he accused of “fraud and mismanagement” of the agro-industrial group, citing the sale of land belonging to CFI’s Langford Estates which was undervalued at $2,20 per square metre against a true market value of around $6 per square metre.

CFI sold the 834 hectares Langford Estate in 2015 to Fidelity Life Assurance in a deal worth $18 million; to pay off its debt to local banks. The group owed FBC Bank, Agribank, CBZ, the Infrastructure Development Bank of Zimbabwe, NMB and Standard Chartered a combined $18 million.

Analysts say despite being choked by high levels of debt, CFI still holds a great deal of promise because of its strategic business units across the agriculture value chain. It has three divisions namely in poultry, retail and light manufacturing and property, all potential gold mines once the economy is on the recovery path.

Under the poultry division it runs Agrifoods, Crest Breeders, Suncrest and Glenara Estates, while under the retail division it operates its flagship Farm and City. The group also operates Victoria Foods, a light manufacturing group and holds a 45 percent stake in Maitlands property group among other properties under its specialised division.

“CFI is a massive company with a lot of assets and has the potential to do extremely well, with viable agro business and best brands in the market,” an analyst said.

“If CFI was not run down, at one point you could easily list four or five businesses out of it, that are listable and scalable, which could be by now, generating almost $80-$100million dollars annually on their own.”

Its financials tell the story of a company in need of a reboot.

In 2016 the company reported a turnover of $29 million from a $96,4 million asset base.

Some analysts contend that this would be the best time to buy into CFI given its immense size.

“Investors are still interested in its assets because they know that, in future, they can easily turnaround CFI and make it a very big company,” an analyst said.

Earlier in May this year, Zimre Holdings chief executive Stanley Kudenga told analysts that Zimre wanted to increase its stake in CFI for diversification purposes and was confident that the company will improve its financial performance in the future.

This explains why there is an intensifying battle over control of the agro-industrial business, which has seen the company’s share price rallying on the market to reach its highest point since dollarisation.

In the year-to-date the share price is up an unbelievable 526,28 percent.

Analysts, however, raise concern about Messina Investments’ ability to turnover CFI. van Hoogstraten, through Messina holds interests in hotel group RTG and Hwange Colliery Company Limited, companies which are going through their fair share of trouble.

“There are question marks around Nick the companies in which he holds a significant shareholding have a lot of problems, like what’s happening to Hwange and RTG. History has shown that he is not the best investor to turnaround a company, but that could just be a coincidence,” said an analyst.