Zambeef Products Share Discussion Threads

[tenapen] 08/12/2023 10:17

Hi GB904150, A very good post and most astute. I had read the results out of interest, but had missed the preference shares.

I bought when it floated on AIM all of those years ago. I sold a couple of years later for a chunky lose. I had such high hopes for my African plays but they have mostly turned to dust. A shame.

[gb904150] 08/12/2023 10:02

I notice for the first time in a number of years they mention the pref shares that will almost certainly not get paid off 16th Sept 2024.



That means they will convert to ord shares at 3.083 so the 100m pref shares will become 308m ordinary shares. It will give BII 50% of the company albeit one that will have 608m shares in issue, so doubling the Mcap but you own 1/2 of it.

The original investment made in 2016 from BII was $65m.

anyone still lurking here?

[catsick] 02/5/2023 01:10

Interesting to see that this is now one of the Krohne fund's biggest holdings, he is an excellent frontier market value investor and will have done his homework on this, well worth signing up to his fund newsletter

[the count of monte_cristo] 12/8/2022 07:35

Yes and very quiet here.

[catsick] 12/8/2022 07:19

Steadily rising to a 3yr high

[gb904150] 15/6/2022 15:16

Interims out. Strong performance.

[catsick] 28/4/2022 06:26

I think we will have to wait and see what happens with the prefs , the amount of cash being generated though will give them options, almost hakf the market cap in 6 months and agri prices are only getting better, also the domestic economy being driven by copper prices is going to give a big boost

[gb904150] 27/4/2022 14:27

I agree, strong trading update.

I wondered catsick if you had any follow up to the question about the preference shares? I notice the company never mentions them....but they are still out there.

It's the Zambian elephant in the room!

[catsick] 27/4/2022 12:51

Very nice trading update indeed, printing cash and agri profits going to be excellent

[gb904150] 23/3/2022 13:34

cs....thanks for the reply.

As a quasi charity what do you think the CDC will choose as an outcome for their pref shares?

I didn't say they were in business to screw anyone over. I said it all comes down to how responsible CDC want to be with the company.

but....if they choose to convert at 3:1 (as they are entitled) it would screw other shareholders. I'm not saying they will, i'm saying they could.

So again....what do we think CDC will actually do? Without knowing that the equity value seems to me to just be a gamble.

Today's difference is that if a knowledgeable shareholder like the Rudlands family are buying they must fancy the odds of it being a worthwhile one.

I agree the macro position is bullish.....politically, copper pricing, agri pricing.....but how does the prefs situation get solved by 2024?

Perhaps with a new loan? But while the valuation by Mcap looks great, on an EV basis and adding in the prefs....not so cheap.

Mcap £21m
EV £52m. Based on 715 ZMW net debt
+ £84m pref shares 'debt'

Values the whole business at £134m.

[catsick] 23/3/2022 11:01

The cdc is a quasi charity, they are not in business to screw anyone over, the macro position in Zambia is also finally very bullish, Decent new leader , copper which is the majority of the economy booming , agri sector globally on a rip, everything is aligned now and that is why this savvy family who made a ton of money during covid from the cigarette business is getting involved

[gb904150] 23/3/2022 09:15

Thanks for that clarification cs.

That is a bullish development. The concern here for me has always been the preference shares, what will happen with them and whether shareholders will be left with much when the issue is dealt with.

The prefs 'debt' is in USD and the ZMW is always inflating vs the USD. It's around $110m in 2022. The repayment date is 2024 and ZAM have no way of paying that.

I think it comes down to how responsible CDC want to be with the company.

CDC can convert at 3:1 into shares but that would screw over other shareholders. They can do it, but it's not a good look.

Any idea what might happen with that?

Prior to this Rudlands stake I don't see the rush here.

But now the Rudlands family are buying up....they must be aware of some developments that suggests the equity is attractive.

[catsick] 23/3/2022 07:29

The holding taken is not the bank of mauritius, it is the Rudlands family vehicle, they are a very big agri / tobacco family in Southern Africa, they just took out the major South African sugar producer, they will be trying to take over zambeef or at least shaking it up ... this is very good news and underlines the value here

[tomboyb] 22/3/2022 15:29

These foods could soon be in short supply due to the war in Ukraine

[tomboyb] 22/3/2022 14:53

THE MAURITIUS COMMERCIAL BANK LIMITED

Has taken a 7.2% stake in ZAM -

RNS out -

[gb904150] 03/12/2021 20:36

If you owe the bank £1m you have a problem.
If you owe the bank £1bn it is the bank who has the problem.

Your calcs on the pref shares are very accurate! $97.8m at the anniversary this year.

Completion 16/09/2016. 100,057,658 shares @ subscription price $0.555 = $55.532

$0.555 / $55.5m in 2016
$0.6216 / $62.16m in 2017 – 12%
$0.6962 / $69.62m in 2018 – 12%
$0.7797 / $78.02m in 2019 – 12%.

Ideal time to pay off. Min price was always $0.77

$0.873 / $87m in 2020
$0.978 / $97.8m in 2021

[34adsaddsa] 03/12/2021 17:44

Compound interest is a monster, just look at the numbers. It was ~$55M in preference shares in 2016 with compound interest the number due now would be about $100M to redeem. In another three years it's $140M. Like I said, they don't have the money to do it and even if they did it wouldn't make financial sense.

If the shares are still where they currently are in 2024 then CDC get $30M in stock. Terrible. Let's imagine they've gone up so CDC get $50M in stock. Would they want that? Owning almost 60% of this already highly illiquid company? Would they hold? Take years trying to get out via sales? I think there's an opportunity for them to convert into debt instead.

In a way, Zambeef have the power here. If you were CDC, would you take $50M in stock or $70M in debt with a 5% interest rate?

[gb904150] 03/12/2021 16:04

Are you suggesting that ZAM will never buy them back?

The issue is that there is a penalty after the 8th anniversary, which is in 2024:

- Holder can convert to ordinary shares at any time on 30 days notice
- Before 8th anniversary – 1:1 conversion to ord shares
- After 8th anniversary 1:3 conversion to ord shares

The pref shares are barely mentioned in reports, but in 2018 annual report the company strategy was clear:

the redemption of the preference shares held by CDC is a significant consideration, as although they rank as equity, the redemption value of the shares escalates at an annual compounded rate of 12%, which is significantly higher than the average cost of the Group’s US Dollar debt, which is approximately 7%. The Board is therefore considering, as a priority, various strategic options that would enable the preference shares to be redeemed.


What do you think the strategy is to deal with the pref shares? A renegotiation of some sort with CDC?

[34adsaddsa] 03/12/2021 12:29

GB904150 just to be clear about the 12%. It's 12% compounded on redemption only. No redemption = no 12%. Converting to ordinary shares = no 12%

[34adsaddsa] 03/12/2021 12:21

Things aren't so swell for CDC. What good is a 12% compounding "interest" if the resulting number is so large that Zambeef will never redeem the preference shares?

They won't get redeemed because they don't have the money to do so and even if they did it wouldn't make sense at this valuation.

CDC could keep the preference shares as they are, receiving no interest payments at all but having the option to convert into about 1/2 of the company at a time of their choosing. But do they really want to own an additional 1/2 of this company? What's the exit plan there? At the current share price, it would also mean a big paper loss. They invested about $55M into those preference shares but would only get back ordinary shares worth about $30M.

The other option is to reach an agreement to convert the shares into debt. Zambeef's current debt load should be much lower by then. Perhaps I'm wrong but I think they would be much more interested in that option.

[catsick] 26/8/2021 08:52

Interesting to see these elections in Zambia are a landslide for the new President who seems to be a decent guy, Has led to a huge surge in the Kwatcha which has appreciated over 25% and removed all last 12 months losses and some extra... This could be the first time in years that fx gives a big boost to the accounts, should be very good indeed for the company as is the high copper price which should make the macro situation in the country very helpful in rescheduling all the countries debts ....

[gb904150] 15/7/2021 08:14

Zambeef operate in Zambia, not in South Africa. I don't see much knock on effect there? Do you?

[pal44] 15/7/2021 05:58

See trouble in SA may impact here. Quite scary what is going on .

[gb904150] 20/6/2021 08:44

I think it's a tiny and illiquid company and takes very little buying to move it. A lot of PI's don't know about the pref shares and the half-year report sounded positive. Perhaps that was enough to move the SP? Was there much volume?

They were tipped in Moneyweek a few weeks ago where it was highlighted how 'cheap' they were on a P/E basis - again no mention of the preference shares.

ZAM doesn't generate anywhere near enough cash to pay off the pref shares before the 8th anniversary (2024). At that point they can convert at 1:3 into equity rather than 1:1. The optics of that would be very poor for CDC so I doubt they would be quite so ruthless. More likely is some kind of debt refinance but in which case ZAM are entirely at the mercy of CDC as to how generous they want to be.

Too much uncertainty for me but perhaps a nice gamble for others.

I've always liked the 'feed Africa' ZAM story but unfortunately that doesn't mean they are a good investment! This one has never shown much prospect of being run in the interests of investors.