Harare - National Foods Holdings Limited, Zimbabwe’s largest food manufacturer producing a wide range of basic fast-moving consumer goods and animal foods is on track with its plans to migrate over to the Victoria Falls Stock exchange (VFEX) at the end of the coming month. National Foods has been listed on the Zimbabwe Stock exchange (ZSE) for the past 52 years.
At the meeting held on Monday, November 7, the proposed delisting of the company from the ZSE was addressed, and the National Foods Board of Directors proposed terminating the company's ZSE listing to list the company's shares on the VFEX. The board subsequently passed a resolution relating to the above in a move that will help the company raise capital among other benefits.
Benefits of NFHL listing on VFEX
With a greater capacity to access US dollars with a "dollarized" financial sheet, National Foods will be better able to raise cash. The potential for the VFEX to develop into a regional exchange increases the likelihood that NFHL will be able to attract a variety of investors who can help the company with its current local expansion plans as well as future potential regional expansion attempts.
Enhanced Liquidity and Reduced Trading Costs - The 2.12% trading fee on the VFEX is less expensive for shareholders than the 4.63% fee on the ZSE. A wider range of investors may find the share appealing because it can be traded in USD.
Efficient dividend repatriation through offshore settlement. Foreign shareholders on the VFEX can freely repatriate their dividends.
Tax incentives for National Foods stockholders include a 5% withholding tax on dividends and no capital gains tax on the sale of shares. As a result, shareholders would keep more of their profits than the ZSE.
Elevated Regional Profile of National Foods - Moving from the ZSE to the VFEX could elevate the company's commercial stature and regional profile, which would strengthen its chances for future local and regional expansion. The VFEX listing would also increase the NFHL investment's marketability in the local area.
Lower Volatility of Value Giving existing National Foods shareholders a de facto third-party USD valuation of the company will help them understand the true worth of their investments, give a more reliable baseline for the stock's performance, and reduce valuation volatility. Furthermore, a precise valuation will support sound decision-making, particularly about the Company's next investment choices.
National Foods' earnings are more effectively consolidated into Tiger Brands Limited's financial accounts because entities listed on the VFEX are required to file financial reports in US dollars.
Why firms are delisting from the ZSE
The Zimbabwe Stock Exchange (ZSE) viability and sustainability are in jeopardy as more companies choose to delist from the exchange in favor of the Victoria Falls Stock Exchange, which deals in US dollars (VFEX).
The move to the VFEX is seen as a danger to the ZSE's continued existence by some.
The majority of ZSE-listed companies are thinking about delisting because they no longer see any value in the market and would rather go to the VFEX, which trades in US dollars.
Lack of liquidity on the ZSE and valuation issues are two of the companies' top problems; switching to VFEX will help them realize their true worth.
Three counters, namely Seed Co International Limited, Padenga Holdings, and Bindura Nickel Corporation, have delisted from the ZSE since the inception of VFEX in 2020.
Following this National Foods’ EGM Notice and announcement has been published today and Getbucks Microfinance Bank has in the past published a cautionary statement regarding their plan to delist from the ZSE and transfer their shares to the VFEX, while Simbisa Brands is now set to migrate to the VFEX by the 2nd of December since shareholders have approved the move and the firm will instantly change its reporting currency from ZWL to USD.
More companies migrating from the ZSE will make sense from a capital-raising standpoint, as well as knowing that enterprises require foreign money for expansion.
To add to this, retail investors will have the chance to join in the exchange with the listing of the Nedbank ZDRs in November 2022, and the introduction of Contract for Differences (CFD) rules as a new product on the VFEX will also support retail involvement.
Importantly VFEX has lower trading costs compared to the ZSE and also has tax incentives that enable the investor to retain more of their returns compared to the ZSE.
NFHL Share Capital
Estimated transaction fees and expenses for the migration are expected to be a little over US$60,000 largely dominated by legal and advisory fees. The share capital of National Foods for 2022 stands as follows: 73,000,000 authorized ordinary shares of nominal value ZW$ 0.01 each, of which as of 30 June 2022 68,400,108 ordinary shares had been issued. The 73 000 authorized shares are valued at ZW$ 101,539,590 in inflation-adjusted terms for 2021.
The Company’s share capital and working capital are adequate for the foreseeable future for the current operations. The directors think that the available working capital is sufficient to cover the cash flow requirements of the Company for its current operation.
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