AICO & SeedCo Report - Sprouting the Green Shoots of a Turnaround….

January 2011

Analyst:

Batanai Matsika
batanai.matsika@imara.co
+263 772 889 556
+263 4 700 000
Table of Contents

Introduction
Global Outlook for Commodities…………………………………………………………………………….…………………………..….………. 2

Zimbabwe Agricultural Sector………………………………………………………………………………….…………………………………….. 2

Maize……………………………………………………………………………………………………………………………………………………………….…… 2
Tobacco………………………………………………………………………………………………………………………………………………………..….. 3
Cotton………………………………………………………………………………………………………………………………….………………………………. 3
Wheat……………………………………………………………………………………………………………………..……………………………………….. 3
Sugar…………………………………………………………………………………………………………..……………………………………………………. 3

Company Analysis
AICO Africa Limited………………………………………………………………………………………………………………………..……….………. 4
Nature of Operations……………………………………………………………………………………………………………….……………….…….. 5
Overview of H1 2011 Results……………………………………………………………………………………………….…………………….…… 6
Operational Review………………………………………………………………………………………………………………………….………………. 6
Outlook……………………………………………………………………………………………………………………………………………………………… 7
Investment Risks & Attractions………………………………………………………………………………………….……………………….…. 7
Valuation and Recommendation……….………………………………………………………………………………………………………….… 8
5-Year Financial Summary……………………………………………………………………………………………………………….…….………… 9

SeedCo Limited……………………..………………………………………………………………………………………………………….……………… 10
Nature of Operations………………………………………………………………………………………………………………………….……………. 11
Overview of H1 2011 Results…………………………………………………………………………………………………………….……………. 12
Operational Review……………………………………………………………………………………………………………………………….…………. 12
Outlook…………………………………………………………………………………………………………………………………………………….………… 13
Technical Indicators………………………………………………………………………………………………………………………………………… 13
Valuation and Recommendation…………………………..……………………………………………………………………………...………... 13
5-Year Financial Summary…………………………………………..…………………………………………………………………………….…..… 14

Imara Contact Details………………………………………………………………………………………………………………………………….……… 15

 
Introduction

Global Outlook for Agricultural Commodities According to the FAO, food prices hit a record high in
The outlook for soft commodities in 2011 is positive, December 2010, surpassing the levels seen during the
spurred by global cyclical recovery and easy hurdles for 2007-08 crisis. The Rome-based organisation also notes
global consumption to surpass constrained global that the rise of commodity prices makes it likely that the
production. Major risks however are higher price volatility; global food import bill will hit a record high in 2011, after
especially should governments implement price controls topping USD 1,000bn last year for only the second time.
and other trade barriers that increase friction in the In November, the FAO raised its 2010 forecast to USD
movement of scarce inventories. 1,026bn, up almost 15 % from 2009 and within a whisker
of a record high of USD 1,031bn set in 2008 during the
Global agricultural production is anticipated to grow more food crisis.
slowly in the next decade but is on track to satisfy
estimated long-term demand. In spite of the recent The weakness of the US dollar, in which most food
economic crisis, the agricultural sector has shown commodities are denominated, has also contributed to
remarkable resilience, with strong supply response to higher commodity prices. In our view, commodity prices
recent high prices and continuing demand growth. will continue to hold in 2011.
International commodity prices are anticipated to trend
higher on the back of a resumption of economic growth,
above all, in developing countries. The rebound in Zimbabwe Agricultural Sector
commodity prices that started at the beginning of 2009 is The Ministry of Finance estimates that the agricultural
expected to continue into 2011 as the global economy sector will register a growth rate of 33.9% in 2010. The
recovers. Rising inflation expectations and actual rate hikes growth is expected to be largely driven by maize, with
in 2011 will also steepen upward-sloping commodity production increasing +34%; tobacco, +110%; sugar, +35%;
forward curves. Other factors that have sustained higher and cotton, 23%.
prices include the increased demand from China,
significant production cuts and some weather-related Agricultural Production Figures in Zimbabwe
factors. In 2010, involuntary supply losses—mostly the
result of severe weather—drove risk across a number of 2008 2009 2010 2011
commodity markets, helping spur significant price surges in Actual Actual Estimate Projected
wheat, sugar, rice, coffee, cotton and corn. 
Tobacco (million kgs) 56 59 123 150
Maize (million tonnes) 0.575 1.24 1.3 1.5
According to the a recent US Department of Agriculture’s
update, the global stocks-to-use ratio (including China) for Cotton (million tonnes) 226 211 260 300
key grains currently stands at 22%, the highest ratio over Wheat (000 tonnes) 34 48 20 50
the past 7-years and close to the historical average of 24%. Sugar (000 tonnes) 298 259 350 400
Rising and volatile domestic staple food prices are an Growth Rate (%) -17.4% 21.2% 33.9% 19.3%
increasing concern in several Sub-Saharan African countries Source: Ministry of Finance
and in some South Asian countries as well. A recent study
(World Bank, Food Price Watch) shows that in Tanzania the Maize
price of maize increased by 21% in the year ending Maize production in 2010 improved from 1.2m tonnes in
February 2010 and in Kenya the price of maize rose by 16% 2009 to 1.3m tonnes. This was largely underpinned by
in the same period. Also, the DRC, Uganda and Zimbabwe the higher hectarage of 1.8m compared to last year’s
were among the countries with the sharpest fluctuation in 1.5m as average maize yields fell from 0.8 tonnes to
prices of main food staples. 0.7 tonnes per hectare due to late rains and drought in
the southern Provinces.
Food price increases contribute to undernourishment and Global Maize Corn Prices
hunger and heighten the importance of food security
policies. This is because the upward trend in price of
staples in domestic markets poses a significant threat to
both food security and nutrition in the region. However,
even in countries such as China, systematic price controls
in various commodity markets have been put in place. Many
other countries, including the United States, also impose
commodity price controls in the form of tariffs, trade
quotas, subsidies, and rules on the warehousing and
transport of commodities. However, incremental measures
may not be ideal for efficient resource allocation. Also,  
these policy prescriptions contribute to higher realised and
Source: www.cnnmoney.com
implied price volatility.

 
Tobacco
Wheat
In the 2009/10 season, about 65,000ha were put under
Over the years, wheat production has been decreasing
tobacco, with 30,000ha under contract farming, 20,000 ha
owing to declining hectarage, funding constraints and
self financed and 15,000ha by communal farmers. As a
unreliable power supply. Under the 2010 winter wheat
result, 123.5m kgs were sold at an average price of USD
programme, Government secured a USD26.6m inputs
2.88. This was against the 2010 mid-year estimates of
support scheme for farmers to access seeds and
around 93.0m kgs and 58.6m kgs realised in the 2008/09
fertilizer at subsidised prices. This was targeting to put
season. The increased production in 2010 benefited from
45,000ha under wheat production. Under this facility,
self financing from the previous year’s tobacco proceeds of
input deliveries amounted to 835 tonnes of wheat seed
around USD   161.0m as well as additional bank and contract
and 22,500 tonnes of compound D fertilizer, with a
financing.   The increased hectarage, as more farmers joined
combined value of USD 11.7m.
tobacco  farming (since it is a cash crop), also enhanced
tobacco  output. In 2011, tobacco output is projected to
Sugar
increase   to 150.0m kgs from about 90,000ha. Private
Total sugar output is expected to increase to 350,000
financing  will remain a major factor in tobacco farming.
tonnes in 2010 from 259,000 tonnes in 2009, largely due
Contract  farming support, which is projected to increase to
to the liberalised business environment and the
40,000ha,   will be augmented by loan facilities from the realisation of macro-economic stability. Furthermore,
banking  sector as well as self financing from previous
support of EUR 13.7m for vulnerable small holder sugar
years’ proceeds.
  producers by the European Union (EU) under its
  Programme of Accompanying Measures for Sugar
Cotton
  Protocol Countries for 2010 is going to complement
  significant investments by the bigger producers.
Cotton  Production Trends
 
400 450
  Output in 2011/12 is anticipated to further increase to
400
350
  450,000 tonnes, with most of this coming from Triangle
350
300
  Sugar’s Hippo Valley Estates where targeted sugar
300
250
  production growth is set to raise output to 330,000 –
250
200
  350,000 tonnes. Already, the crush rate at Hippo Valley
200
150 mills has since increased closer to capacity as the
  150
100 100
second refurbished line was also brought into operation.
 
50 50
Further re-establishment and rehabilitation of
  infrastructure in existing cane production areas should
- -
  return the sugar industry to its former peak levels of
1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

  production of 600,000 tonnes per annum.

 
 
  Global Sugar Prices
Tonnes (000)-LHS Hectares (000)-RHS
 
 
Source:  Imara Edwards Securities
 
Zimbabwe’s   hand picked cotton enjoys a premium on the
international
  markets because of its high quality and
International
  lint prices have since recovered from as low
as US42c/lb  to US100c/lb. Cotton production is also
expected  to increase to about 300.0m tonnes in 2011
from about 260.0m tonnes in 2010.
 
 
In-order to promote productivity, the Government of
 
Zimbabwe enacted Statutory Instrument 142 (SI142).
Under this   new legislation, all cotton buyers have to
register  with the Agricultural Marketing Authority and
show their   intention to fund the crop. The legislation
Source: www.cnnmoney.com
therefore  ensures that the industry has serious
 
participants and also attempts to curtail side-marketing.

 
 EQUITY RESEARCH

ZIMBABWE

AGRICULTURE
 
 
  11 January 2011
 
 
AICO inherently has a volatile earnings stream due to the BLOOMBERG: AICO:ZH HOLD
seasonal  variability of dry land cotton production and Current price (USc) 20.0
 
unpredictable lint prices on world commodity markets. Target price (USc) 41.0
However,   with bullish expectations with regards to
Upside/Downside (%) 105.0
commodity  prices in 2011 and beyond and an estimated
Liquidity
growth   rate of 19.3% in the Zimbabwe agricultural
Market Cap (US$m) 106.2
sector,   AICO will definitely be one of the exciting
agricultural names to look at in 2011. Shares (m) 531.1
 
  Free float (%) 49.2
Fund raising
  initiatives on the cards. Peter Lynch, once Ave. daily vol ('000) 296.0
commented,
  we quote, ‘The key to making money in stocks Share price performance
is not to  get scared out of them’. AICO has indicated a 6 Months (%) 14.0 43%
significant
  capital raising exercise of USD 50.0m (half of its 12 Months (%) 20.0 0%
current  market capitalisation). In our view, the capital 52 Week High*(13 Jan 2010) 29.0
raising will be a catalyst for the share price as the company
  52 Week Low*(28 June 2010) 13.5
expunges its debt and restructures its loans. We also expect
  *Bloomberg
the funding to grow and sustain current operations
  Financials 2010 2011F 2012F
 
Huge interest bill negating positive operational EPS (USc) (0.8) 1.1 2.4
 
performance. AICO’s H1 2011 results reflect that finance DPS (USc) - - -
 
costs remain a major area of concern. Finance charges NAV/share (USc) 15.5 17.3 17.9
amounting  to USD 8.2m were recorded as a result of high EBITDA margin (%) 12.3 18.2 18.2
 
borrowings. The total loss before tax amounted to USD
11.7m (H1  2009: USD 4.5m) while the loss for the period
STRENGTHS WEAKNESSES
was USD  10.9m translating to a loss per share of US1.89c.
Diversified business Input scheme recoveries
 
Dominant market share
Striking  undervaluation. AICO remains undervalued by the
Strategic Partneships
market on  a sum of parts (S.O.P) basis. AICO’s 51% stake in Strong management team
SeedCo is  currently valued at USD 112.8m. This value is in OPPORTUNITIES THREATS
actual   fact greater than AICO’s current market Continued regional expansion Competition from new entrants
capitalisation
  of USD 106.2m. The market has somewhat New products for FMCG business i.e. the Chinese
missed the
  cue as it also means that the value of the other Improving disposable incomes Volatile international lint prices
businesses
  (Cottco, Olivine and Scottco) is not factored in. SI 142 ensures favorable recoveries Drought
In the light
  of the pending recapitalisation, our take is that
dedicated-money
  should stay with AICO.
  AICO Limited: Relative Graph
Financials
  (US$m) 2010 2011F 2012F 1.2 7,000,000

Turnover  162.9 203.6 254.5 1

6,000,000

EBITDA   20.1 37.0 46.2

5,000,000
 
Attributable earnings (4.3) 1.1 4.2 0.8

  4,000,000
RATIOS
  0.6
Gearing (%) 54.7 40.0 53.8 3,000,000
 
RoaA (%)  (2.0) 2.6 5.3 0.4
2,000,000
RoaE (%)  (5.2) 6.3 13.3
0.2
1,000,000
Valuation  Ratios
PBV (x)   1.3 1.2 1.1 0 -
19-May-09

19-May-10
19-Mar-09

19-Mar-10
19-Aug-09

19-Aug-10
19-Apr-09

19-Nov-09
19-Dec-09
19-Jan-10

19-Apr-10

19-Nov-10
19-Dec-10
19-Jun-09
19-Jul-09

19-Oct-09

19-Jun-10
19-Jul-10

19-Oct-10
19-Sep-09

19-Sep-10
19-Feb-09

19-Feb-10

PER (x)   na 18.2 8.4

 
EV/EBITDA (x) 7.5 4.1 3.3
  Volume Traded-RHS Rel to Industrial Index-LHS

 
Nature of Operations
AICO  Africa Limited is an integrated agro-industrial
conglomerate.
  It was incorporated in Zimbabwe on 23 July
2008 and  subsequently reverse listed on the ZSE on 1
September
  2008, in place of Cottco, through a group
restructuring
  exercise. AICO wholly owns Cottco, which with
nine ginneries, constitutes the ginning operations of the
 
Group. AICO holds a 51% stake in SeedCo Limited, which in
 
turn holds a 100% interest in Quton Seed Company, a cotton
 
planting seed production house. The group also has a 49%
stake in  Olivine Holdings and 75% interest in Scottco.
 
Cottco 
Cottco’s  main line of business is the purchase of seed cotton
 
from farmers and the sale of the lint after processing. Its
products  include lint, ginned seed, delinted seed and linters.
Source: Company Records
 
The company has nine ginneries with a capacity of 260,000
tonnes  and average age of 20 years. The company’s cotton
intake  in 2010 was about 98,000 tonnes translating to a
market  share of 47%. Management at Cottco argue that the
group has
  the capacity to increase its market share to about AICO Top 10 Shareholders
52% and   can take in more than 400,000 tonnes of cotton 1 National Social Security Authority 17.86%
under sound
  economic conditions.
2 Old Mutual Life Assurance 10.88%
 
Cottco   approximately 80,000 small scale farmers in the 3 Kensington Acquisitions Ltd - NNR 9.42%
growing  of cotton through an Inputs Credit Scheme that 4 Burket Associates Ltd NNR 7.58%
supplies  farmers with key inputs such as fertilizer, seeds and
5 Barclays Zimbabwe Nominees 5.89%
chemicals.
  Under the scheme, Cottco’s technical field staff
assists  farmers in drawing up their support requirements in 6 Caperal Limited NNR 5.11%
advance  of the season. Disbursements are made either in the 7 National Social Security Authority - WCIF 2.95%
form of cash or inputs such as planting seed, chemicals or 8 Old Mutual Life Assurance Co. Zim Ltd 2.61%
 
fertiliser or a combination of both. Cottco is a dominant
  9 Old Mutual Zimbabwe Ltd 2.39%
player, accounting for 65% of the country’s ginning capacity
 
and 50% of national crop throughput. Major export markets 10 Stanbic Nominees P/L 2.14%
include  South Africa, Asia, Europe and South America. Source: Imara Edwards Securities
Cotton  production was insulated from disruptions related to
the land  reform programme in Zimbabwe, as it is mainly
produced  by communal farmers.
  AICO Cotton Intake
SeedCo  300,000 100%

SeedCo,  which is 51 % owned by AICO, is a developer, grower 90%

250,000
and marketer
  of certified seeds. It has a market share of 80%

approximately
  65% in Zimbabwe, and has operations in 200,000
70%

Zambia,  Malawi, Botswana, DRC, Swaziland, Tanzania, 60%

Uganda  and Kenya. Its main products include maize, wheat, 150,000 50%

barley,   cotton, soya, sorghum and groundnut seeds. The 40%

company   is currently exploring opportunities in West Africa 100,000
30%
and Ethiopia
  20%
50,000
  10%
Annual  production currently amounts to between 50,000 and - 0%
60,000   MT, and the group’s total capacity is estimated at 2002 2003 2004 2005 2006 2007 2008 2009 2010

80,000  MT. Approximately 70% of SeedCo’s sales volumes is

National (Tonnes) Cottco (Tonnes) Market Share
hybrid  seed maize. The main competitors in Zimbabwe are
Cargill and Panaar. SeedCo’s foremost strength is its
 
research capabilities. There are four research stations in the
  Source: Imara Edwards Securities
region, two of which are in Zimbabwe and the other two in
 
Zambia and Kenya.
5

 
Olivine Holdings
AICO acquired a 49% shareholding in Olivine Holdings at a cost
  Income Statement (USD 000 H1 2010 H1 2011 %∆
of USD 6.8m in 2008. The Industrial Development Corporation
  Revenue 54,501 53,082 -3%
of Zimbabwe (IDC) holds the remaining 51%. Olivine
 
manufactures edible oils and fats, bath soaps, candles, baked Operating Profit (1,204) (4,173) -447%
beans and   canned vegetables. It has the capacity to produce Loss before tax (4,528) (11,706) -159%
 
40,000 tonnes of cooking oil, 29,000 tonnes of margarine and Attributable Earnings (4,197) (10,903) -160%
  and 40,000 tonnes of soaps per annum. Historically,
baker’s fat EPS (USc) (0.50) (1.90)
its market  share has been around 45%. Operations are large
Balance Sheet (USD 000) H1 2010 H1 2011 %∆
scale and   the company has a good reputation for quality.
Total Assets 262,464 278,726 6%
There is   strong demand for Olivine’s’ brands in countries such
as Botswana,
  Zambia, Malawi and Mozambique. There are also NAV 87,381 71,861 -18%
good prospects
  in South Africa and DRC. The current capacity Current Assets 129,357 157,044 21%
utilisation
  is about 20%-30%. Current Liabilities 105,369 154,474 47%
  Current Ratio 1.23 1.02
Overview   of H1 2011 Results Cash flow (USD 000) F2010 H1 2011
Turnaround  still on course. Although the seed business has Operating activities 8,386 (63,337)
turned the  corner, the FMCG and cotton business are still Investing activities (5,871) (6,599)
recovering.
  The main constraint has been the lack of adequate
Financing activities 340 44,515
working  capital. The group’s revenue line declined 2.6% to USD
53.1m as Net Increase in cash 2,855 (25,421)
  aggregate sales volumes declined 33% to 55,600
tonnes. The
  group EBITDA was negated by the FMCG unit which
recorded  a loss. Overall, the group loss from operations
amounted   to USD 4.2m worsening from USD 1.2m the prior
period.   Revenue Contribution: H1 2011
  Spinning, 6% FMCG, 13%
Finance costs remain a major area of concern. Finance
 
charges amounting to USD 8.2m were recorded as a result of
 
high borrowings. The total loss before tax amounted to USD
11.7m (H1   2009: USD 4.5m) while the loss for the period was
USD 10.9m   translating to a loss per share of US1.89c. The Seed, 36%
 
closing cash position was a negative USD 25.4m mainly arising
from USD   63.3m utilised in operating activities despite a USD
44.5m cash  inflow from financing activities.
Cotton , 45%
 
Operational
  Review
Satisfactory
  performance from SeedCo. Overall, seed
production  was up 35% to 44,842 tonnes from the prior period H1 2011:EBITDA Analysis
whilst maize
  seed production was up 83%. Zimbabwe seed 1.0 3% 5%
production  trebled and regional businesses also supported the 2%
strong performance.
  In terms of research, two new seed 0.5 0%
-1%
varieties  were introduced, and they are expected to have high - -5%
yields. The
  East African SBUs and the Zambian research farm Group Cotton Seed FMCG Spinning
are expected
  to increase profitability and efficiency. (0.5)
-15%
-10%

Borrowings  for SeedCo totalled USD 24.0m at rates of around (1.0) -15%
15% for Zimbabwe,
  10% from Afreximbank and between 4-5% in
the region.
 
(1.5) -20%

  (2.0) -25%
Cotton intake increases but market share declines. For the -28%
 
2009/10 season, the national cotton crop at 262,000 tonnes (2.5) -30%
 
went up 25% on the prior period, while Cottco’s cotton intake
increased   13% to 111,075 tonnes. Ginning is almost complete
EBITDA (US$m)-LHS EBITDA Margin-RHS
 
and disbursements for the forthcoming planting season have
started.   Cottco’s market share has declined to 42% from
around  47% due to the entry of new players. Cottco is
Source: Imara Edwards Securities
targeting  an intake of more than 180,000 tonnes in 2011.
 

 
  
Cost management remains key. A review of the cost structure
  Contribution to PAT: H1 2011
is in progress at Cottco. The company’s staff rationalisation
exercise  has reached a fairly advanced stage. Management has Other 3%
indicated  its intention to reduce staff levels from 500 to about
 
200 employees as a way to cut costs and reduce the break even -31% FMCG
point to  80,000 tonnes of cotton a year. The staff rationalisation
exercise  is expected to cost about USD 2.5m. -6% Spinning
 
The Chinese
  Question. Management believe that Cottco lost as -14% Seed
much as   12,000 tonnes of cotton largely as a result of side-
marketing.
  While Cottco was paying US40c/kg to contract -52% Cotton
farmers,   a Chinese firm was paying about US50c/kg for the
cotton,  without having funded the growing thereof. However, -60% -50% -40% -30% -20% -10% 0% 10%

amendments
  to SI 142 are expected to see a more orderly
market  compared to the previous years. Source: Imara Edwards Securities
 
Strong  recovery in lint prices. Generally, prices are set to
continue   on an upward trend due to reduced stockpile levels at Analysis of Debt USDm
the Liverpool
  Cotton Exchange. Current prices are already Core debt 40.0
averaging USD 1.62 per pound. However, Cottco did not benefit Long term interest bearing deb 15.0
 
fully from high global lint prices, given an average price of US Seasonal working capital debt 43.0
 
82c per pound. However, the company has started locking in
  Total interest bearing debt 98.0
some of its future crop through forward contracts.
  Source: Imara Edwards Securities

Strong  volume recovery for the FMCG business. FMCG volumes

were up  98% from the prior period albeit off a low base. The
 
main constraint hindering operations has been utilities supply
and the   limited availability of working capital. Capacity
Cotton Prices
utilisation
  has thus been stagnant at 20%-30%. Shortage of soya
beans and  competition are also some of the challenges the
company   is facing. Product rationalisation is currently in
progress. 
 
Outlook   and Strategy
Fund raising
  initiatives on the cards. Management is working
on a fund  raising initiative for the cotton and FMCG units which
should be  concluded by the end of Q1 2011.
 
The capital raising will involve an amount of about USD 50.0m
 
and indications are that it would include a rights offer. The
company’s  borrowings remain large with interest costs expected
to reach   USD 17.2m (H1 2011: USD 8.2m). Total borrowings are Source: www.cnnmoney.com
at USD  153.5m at an all in cost of 11.1%. Interest bearing debt
as at 30 September 2010 was USD 98.0m. This includes USD Cotton prices have increased 86.86% since Jan 2010. In
 
40.0m of core/carryover debt, USD 15.0m of long term interest addition, cotton future prices are trading at historic highs
bearing  debt and USD 43.0m of seasonal working capital debt. above USD 1.4481 a pound. Prices are expected to continue
recovering into the future, backed by improved demand. A 5-
  year analysis of price trends shows that the price of cotton
The capital
  raising is expected to expunge debt and necessitate reached historic highs between 2007 and 2008. However,
the restructuring of AICO’s. In addition, we expect the funding prices had dipped in 2008 and 2009 as a result of the Global
 
to grow and sustain current operations. As a result, both the Financial Crisis.
Cottco   and the FMCG business are expected to return to
profitability
  soon there-after.
 
 

 
Higher volumes and prices in FY 2011. At SeedCo,
production is expected to grow in line with the huge
demand emanating from food self sufficiency initiatives in
  The expected sales volumes for maize are
key markets.
estimated  to be around 60,000 MT in FY 2011. Zimbabwe
will contribute 17,000-18,000MT, Zambia 15,000MT,
 
Malawi 6,500 MT, Tanzania 4,000 MT and Kenya 3,500 MT.
The average selling price for maize is expected to be
about USD  2,000/MT. As for other seeds, volumes are
estimated  to be 7,000 MT, at average selling prices of USD
1,300/MT.   to borrow finances for working capital needs. This
Long term  prospects are bullish. While improved sales
volumes for  the group are expected in FY 2011, the cotton
and FMCG  units are forecast to post losses. Performance
in FY 2011  is expected to be largely supported by SeedCo.
SeedCo’s medium to long term target is to generate gross
revenues of  about USD 100.0m-USD 120.0m per year on
net margins  of 15-20%. For Cottco, the target is to
generate gross revenues of about USD 100.0m per year on
 
net margins  of 15-20%. As for the FMCG business,
management targets gross revenues of USD 80.0m–USD
120.0m and   net margins of 10-15%.
 
Key Investment
  Attractions
ƒ In  Zimbabwe, communal small scale farmers have
traditionally been the main cotton producers and
the  bulk of the product has always been destined
for  export markets. The key issue is that
communal farming was not negatively affected by
 
the  land reform programme and production has
been consistent, fluctuating only due to seasonal
conditions. As such, we view the cotton business
as  low risk relative to other crops;
ƒ Firm
  cotton prices present a significant upside in
terms of revenue growth for the cotton business;
 
ƒ AICO’s stake in SeedCo offers further
diversification from the cotton industry; and
ƒ Earnings
  from exports hedge the company against
any  form of local economic downturns.
 
Sum Of   Parts Valuation
Division  Shareholding Valuation Approach
Cottco   100% Segmental Net Asset Value (NAV)
SeedCo   51% DCF Valuation (EV of US$305.9m)
Olivine   49% Segmental Net Asset Value (NAV)
Scottco 75% Segmental Net Asset Value (NAV)
Total Value
No of Shares
Value Per   Share
Source: IES/Company Reports
Note: The  NAV values are based on FY 2010 financials
Key Investment Risks
ƒ There is a risk of dilution given the fact that the
company will be raising USD50.0m (approximately
half of its current market capitalisation);
ƒ Side marketing can significantly increase AICO’s
cost of sales and reduce the company’s margins as
bad debts increase;
ƒ AICO’s operations are subject to the vagaries of
weather conditions such as droughts and floods;
ƒ The seasonal nature of the business requires AICO
presents a risk as cash flows will be strained
especially when market interest rates are punitive.
Generally, the first half of the year in a cost
accumulation period as the group will be financing
cotton growers;
ƒ There is a risk of debtor defaults, especially when
climatic conditions are adverse. This ultimately
leads to reduced recoveries and may lower
production levels;
ƒ The fact that the cotton grower base is communal
also implies that it is mostly rural. Farmer
productivity levels and yields therefore tend to be
lower due to limitation in terms of irrigation and
more advanced farming techniques.
Valuation and Recommendation
AICO remains undervalued by the market on a sum of parts
(S.O.P) basis. AICO’s 51% stake in SeedCo is currently
valued at USD 112.8m. This value is in actual fact greater
than AICO’s current market capitalisation of USD 106.2m.
The market has somewhat missed the cue as it also means
that the value of the other businesses (Cottco, Olivine and
Scottco) are not being factored in.
Using a S.O.P valuation approach, we derived a value of
US41c, implying a 105% upside potential to the current
price of US20c. However, AICO’s has indicated a significant
capital raising exercise of USD 50.0m (approximately half
of its current market capitalisation). Accordingly, we
recommend investors HOLD pending final details of the
recapitalisation exercise.
Value
$20,188,000
$167,214,923
$25,517,000
$5,765,000
$218,684,923
531,065,109
$0.41
  
AICO - 5 YEAR FINANCIAL SUMMARY
 
 
31 MARCH (US$m) 2005 2006 2007 2008 2009 2010 2011F** 2012F*
 
Balance Sheet
 
Shareholders' equity 9.1 16.3 5.4 82.6 85.7 82.5 97.4 111.5
Minority
  interests 7.2 4.2 3.5 17.9 29.6 32.1 42.5 41.3
Total shareholders' equity 15.4 21.3 10.3 136.9 154.9 114.6 155.0 171.5
 
Interest Bearing Debt 38.4 33.5 7.2 15.4 40.7 57.3 48.0 62.9
 
Trade creditors 11.3 8.0 1.0 5.6 9.3 40.1 15.7 13.8
  Liabilities
Current 13.6 44.9 2.7 7.5 17.4 52.8 34.4 31.8
  Liabilities and equity
Total 67.4 67.2 20.2 159.8 212.9 224.7 231.6 248.4
Fixed
  Assets 10.7 4.7 6.8 126.1 132.8 116.8 133.8 134.8
Investments 0.0 0.0 0.0 0.8 2.0 0.7 1.0 0.4
 
Stock 19.3 11.2 5.7 10.1 29.6 37.4 47.5 45.1
 
Debtors 0.0 13.7 6.1 20.3 37.0 41.9 34.0 53.4
Cash  at bank 11.6 31.4 1.4 1.5 5.7 12.2 11.2 11.8
  Assets
Current 30.8 62.5 13.4 32.9 78.2 107.1 102.6 119.7
Total
  Assets 67.4 67.2 20.2 159.8 212.9 224.7 231.6 248.4
Income Statement
 
Turnover 163.8 67.5 47.4 145.0 120.7 162.9 203.6 254.5
 
EBITDA 33.5 22.5 20.7 74.7 34.7 20.1 37.0 46.2
 
Associate income - - - 0.0 - - - -
  before Tax
Profit 4.4 22.5 27.4 61.6 16.8 4.9 10.3 17.9
Taxation
  (0.3) 0.0 7.5 13.2 2.9 0.3 6.2 4.5
Profit after Tax 4.6 22.5 19.9 46.0 15.3 4.5 7.6 13.4
 
Minorities 5.2 0.0 1.8 10.7 7.6 6.7 6.5 9.2
 
Attributable Income (0.6) 31.1 19.8 35.3 7.8 (4.3) 1.1 4.2
 
 
Weighted shares (m) 530.51 531.07 531.07 531.07
EPS  (USc) (0.10) 5.85 3.73 6.65 1.46 (0.80) 1.10 2.37
DPS (USc) - 1.21 - 5.10 - - - -
 
NAV per share (USc) 1.71 3.08 1.02 15.55 16.13 15.53 17.30 17.90
 
EV/EBITDA 4.52 6.74 7.32 2.03 4.36 7.55 4.09 3.28
 
RoaA  (%) (0.79) 46.18 45.36 39.26 4.17 (1.95) 2.59 5.25
RoaE  (%) (2.14) 169.06 125.47 48.00 5.33 (5.18) 6.34 13.25
Gearing ratio (%) 295.23 12.71 107.55 16.76 40.83 54.75 40.02 53.83
 
Interest cover (x) 1.15 n/a n/a 10.25 3.00 1.18 2.05 1.67
 
Margins
Op  margin (%) 20.44 33.28 40.89 47.06 22.28 7.85 16.91 17.06
  margin (%)
EBITDA 20.44 33.28 43.59 51.53 28.78 12.31 18.16 18.16
PBT  margin (%) 2.66 33.31 57.73 42.47 13.96 2.99 5.05 7.03
Financial figures for 2005 to 2009 were derived using the Old Mutual Implied Rate (OMIR), which may not reflect a true
 
account due to variability of exchange rates during that period.
 
** Financial forecasts for 2011 and 2012 have not been adjusted for the capital raising exercise. We will update our model
 
once full details have been published.
 
 
 
 
 
 

 
 EQUITY RESEARCH

ZIMBABWE

AGRICULTURE
 
  11 January 2011
  
We view  SeedCo as one of the most exciting stocks on BLOOMBERG: SEEDCO:ZH BUY
the ZSE.  From a position of major value destruction Current price (USc) 115.0
inflicted  by price controls, dollarization in Zimbabwe has Target price (USc) 159.0
positioned
  SeedCo on a solid growth trajectory. While Upside/Downside (%) 38.3
production capacity has improved, average seed prices Liquidity
have also  increased. The average price of maize seed is
Market Cap (USDm) 221.1
  2,000/MT – USD 3,000/MT. Since seed prices
around USD
are a function of food prices, rising food prices are Shares (m) 192.3
expected to propel seed prices. The cherry on the top Free float (%) 29.7
remains the potential for expansion in other regional Ave. daily vol ('000) 53.4
markets, outside Zimbabwe. Share price performance
6 Months (%) 75.0 53%
Cost Accumulation Period. As expected, SeedCo reported
12 Months (%) 86.0 34%
a net loss for the period of USD 1.4m. The first half of the
52 Week High*(11 Jan 2011) 115.0
year is usually a cost accumulation period. An operating
loss of USD 0.69m was registered in line with the seasonal 52 Week Low*(23 April 2010) 67.0
nature of the company’s business after taking into account *Bloomberg
operating expenses amounting to USD 9.6m on a gross Financials 2010 2011F 2012F
profit of USD 8.5m. EPS (USc) 7.0 9.1 10.3
DPS (USc) 1.4 2.0 2.3
Overall production volumes set to increase in FY2011.
NAV/share (USc) 29.6 36.7 44.8
Management estimate total volumes of about 48,000- 50,
000MT for maize and 8,000MT for other seeds for FY 2011. EBITDA margin (%) 22.6 23.8 23.8
Using average prices of US$2,000/MT for maize and USD
1,300/MT for other seeds, our output based model STRENGTHS WEAKNESSES
generates a revenue estimate of USD 108.4m for FY 2011. Significant market share Dependence on regional
At a margin of 16%, we estimate after tax earnings to be Strong brands & Syngenta r/ship governments

around USD 17.5m. Growing presence in SSA Aggressive competition from

Strong Research & Development Panner and imported varities
Hybrids protected by patents Over reliance on maize
An undisputed Buy. Our DCF valuation technique values OPPORTUNITIES THREATS
the counter at USD 1.59 per share which implies a forward Quintessential recovery play Drought
PER of 17.5x and upside to the current price of 38%. For a on Zimbabwe Agric. Sector Lower aid inflows and less

company experiencing aggressive growth in productive Growth in Angola, Malawi & Tanzan public spend on small holder
Gvt Opening up to GMO varieties farmer input schemes
capacity and that possesses strong cash generating Fertilizer and fuel price shocks
capabilities, we believe this valuation to be justified. The
company continues to merit our BUY recommendation.
SeedCo Limited: Relative Graph
3 900,000
FINANCIAL SUMMARY (USDm 2010 2011F 2012F
800,000
Turnover 77.0 108.4 123.5 2.5
700,000
EBITDA 17.4 25.8 29.4
2 600,000
Attributable earnings 13.4 17.5 19.9
500,000
RATIOS 1.5
400,000
Gearing (%) 6.2 4.8 3.8 1 300,000

RoA (%) 15.0 16.3 16.2 200,000

0.5
RoE (%) 19.0 20.5 20.5 100,000

Valuation Ratios 0 -
19-May-09

19-May-10
19-Mar-09

19-Aug-09

19-Mar-10

19-Aug-10
19-Apr-09

19-Nov-09
19-Dec-09

19-Apr-10

19-Nov-10
19-Dec-10
19-Oct-09

19-Jan-10

19-Oct-10
19-Jun-09
19-Jul-09

19-Sep-09

19-Jun-10
19-Jul-10

19-Sep-10
19-Feb-09

19-Feb-10

PBV (x) 3.9 3.1 2.6

PER (x) 16.5 12.6 11.1
Volume Traded-RHS Rel to Industrial Index-LHS
EV/EBITDA (x) 12.4 8.4 7.3

10

 
Nature of Operations
SeedCo is a developer and marketer of certified seeds. Its vision
is to dominate the seed business in Africa. Currently, it has a
  of around 65% in Zimbabwe, and has operations in
market share
various countries
  in Africa including Zambia, Malawi, Botswana,
DRC, Swaziland,
  Tanzania, Uganda and Kenya. Its regional
market share is around 40%, on average. SeedCo’s main products
 
include maize, wheat, barley, cotton, soya, sorghum and
groundnut  seeds.
 
SeedCo’s  business model can be broken down in four parts as  
follows;
 
1. Research- SeedCo employs world class breeding systems
  utilises vigorous market oriented research and
and Source: Company Reports
breeding
  programmes in order to maintain a  high rate of
product innovation. SeedCo’s foremost strength
 
continues to hinge on its research capabilities. It has four SeedCo Top 10 Shareholders
 
research stations in the region, two of which are in 1 AICO Africa Limited 50.57%
Zimbabwe
  and the other two in Zambia and Kenya;
2 Old Mutual Life Assurance Co. 10.37%
 
2. Seed Production- Seedco relies on an established out 3 Fed Nominees P/L 2.99%
 
grower network to produce seed. SeedCo owns and 4 Barclays Nominees P/L - NNR 2.11%
 
supplies the parent seed to the out growers. Annual
5 Fed Nominees P/L 1.70%
production
  currently is around 60,000MT, and the
group’s total capacity is about 80,000 MT. SeedCo also 6 Barclays Nominees P/L - NNR 1.61%
 
owns Quton, the only cotton seed producer in Zimbabwe 7 Local Authorities Pension Fund 1.54%
 
with a production base of about 10,000 MT a year and 8 Old Mutual Zim Ltd 1.45%
 
about 20 seed varieties; Seed production is in three
countries
  (Zimbabwe, Malawi and Zambia) whilst a sales 9 Stanbic Nominees P/L 1.14%
presence
  is in five countries. Most of the seed sold in 10 Datvest Nominees P/L 0.91%
other markets is produced in Zambia. Source: Imara Edwards Securities
 
  Processing- SeedCo uses world class processing and
3. Seed
packaging
  technologies and all seed is treated at its own
plants
  or leased facilities; and
  Marketing and Distribution- As a result of a wide
4. Seed
  and regional foot print, SeedCo boasts of a strong
local
distribution
  network and relatively strong brand. The
main
  competitors in Zimbabwe are Cargill and Panaar.
 
SeedCo Market Share
 
20,000 70%
 
18,000
60%
 
16,000
14,000 50%
 
12,000 40%
 
10,000
30%
 8,000
6,000 20%
 4,000
10%
 2,000
  - 0%
Zambia

Kenya

Tanzania
Zimbabwe

Malawi

 
 
Sales Volumes (Tonnes)-RHS Market Share-LHS
  Source: Company Reports
  Source: Imara Edwards Securities

11

 
Overview of H1 2011 Results
Cost Accumulation Period. As expected, SeedCo reported a Income Statement (USD 000 H1 2010 H1 2011 %∆
net loss for the period of USD 1.4m. The first half of the year
Revenue 12,904 20,351 58%
is usually a cost accumulation period. An operating loss of
  (H1 2009: USD 1.4m) was registered in line with Gross profit 5,443 8,504 56%
USD 0.69m
the seasonal nature of the company’s business after taking Operating Profit (1,401) (693)
 
into operating expenses amounting to UD $9.6m on a gross Loss before tax (1,962) (938)
 
profit of USD 8.5m. Attributable Earnings (1,962) (1,431)
  EPS (USc) (1.02) (0.74)
Increased  production volumes. Revenues were up 58% on H1 Balance Sheet (USD 000) F2010 H1 2011 %∆
2010 to  USD 20.4m on the back of a 35% jump in group seed Total Assets 89,498 103,182 15%
production while maize seed production volumes went up
  NAV 56,965 51,620 -9%
83%. Maize sales grew by 58% following early seed intake
  Current Assets 52,010 62,577 20%
from growers and growing demand from markets requiring
the seed  for winter plantings. Current Liabilities 18,625 38,525 107%
Current Ratio 2.79 1.62
 
Margins expected to improve. The gross profit margin was Cash flow (USD 000) F2010 H1 2011
 
maintained at the same levels of around 42% but is expected Operating activities 11,397 (19,850)
 
to improve due to reduced grower costs. The jump in Investing activities (2,688) (3,772)
overheads  was fuelled by the setting up of new SBUs in Financing activities (780) (4,389)
Tanzania,  pilot production in Ethiopia and the new seed Net Increase in cash 7,928 (28,011)
processing and storage facility in Zambia.
 
Gradual   growth in asset base. On the balance sheet, the
group had  total assets amounting to USD 103.2m, after the
PPE value  went up 8% following the purchase of a new seed
processing and storage facility in Zambia. Inventory levels
 
also improved to USD 41.2m from the FY 2009 closing
position  of USD 14.6m, due to higher seed intake which saw
group maize
  stocks going up by 34,000MT mainly from
Zimbabwe.  Trade and other receivables of USD 20.0m
include USD 2.8m outstanding from the Zimbabwean
 
government. Borrowings amounted to USD 24.0m at rates of
around  15% for Zimbabwe, 10% from Afreximbank and
between  4-5% in the region.
 
Operational Review
  increase seed production paying off. The group
Efforts to
recorded  favourable improvements in seed production SeedCo Margins
volumes.  Looking at maize, Malawi registered a 24% growth 70%
to 5,700MT,
  Zambia a 29% growth to 16,000MT while in 60%
60%
Zimbabwe production volumes trebled to 23,000MT. The
 
group estimates an average growth of about 20% in maize 50% 47%
42% 42%
 
seed production for FY 2011. 40%
  30%
National demands met in Zimbabwe. SeedCo is lobbying
 
government to lift the export ban on agricultural inputs to 20%
enable  it to dispose of surplus seed stocked in its 10% 5% 4%
warehouses.
  Total production of seed doubled from 20,000
0%
MT in 2009
  to 48,000MT. However, due to lack of purchasing Gross Margin Overheads Finance charges PAT Margin
power from farmers, there is a lot of excess seed lying idle. -10%
  -7%
H1 2010 H1 2011 -15%
-20%
SeedCo is  willing to export the excess given that it has met
the national
  requirement. Efforts are being made for the
Government
  to lift the export ban so that the surplus seed Source: Imara Edwards Securities
can be disposed. SeedCo had supplied 12,500MT into the
 
seed network and approximately 12,000MT is stocked in
 
warehouses.
 

12

 
Outlook and Strategy
Future growth prospects also encouraging. The new
Tanzania SBUs, SeedCo Tanzania and Quton Tanzania are SeedCo Production Volumes (Tonnes)
expected  to start contributing to group profits in the short 90,000
term, with  the first locally produced seed deliveries done in 80,000
the first  half. The new Zambian storage facility is expected 70,000
to increase efficiencies, thus lowering operating costs while 60,000
 
in Malawi and Zambia the voucher programmes are expected 50,000
to attract  greater seed volumes. Ethiopia, with an estimated 40,000
market of  40,000MT against a supply of 5,000MT is expected 30,000
to be the   next big market. While frequent power outages 20,000
have negatively affected winter cereals crop sales, 10,000
 
management is optimistic that overall group profitability is -
 
not threatened. 2008 2009 2010 2011F 2012F

 
Overall production
  volumes set to increase in FY 2011. Source: Imara Edwards Securities
Management estimate total volumes of about 48,000-50,
000MT for  maize and 8,000MT for other seeds for FY 2011.
 
Using average prices of USD 2,000/MT for maize and USD
Valuation Using a DCF Model
1,300/MT  for other seeds; our output based model generates
a revenue  estimate of USD 108.4m for FY 2011. At a margin
of 16%, we estimate after tax earnings to be around Implied Equity Value and Share Price
US$17.5m. 
Enterprise Value $330,660,318
  Less: Interest bearing debt ($23,941,394)
Valuation  and Recommendation Less: Non-controlling Interest ($2,058,246)
Our DCF  valuation technique values the counter at USD 1.59 Plus: Cash and Cash Equivalents $1,262,220
per share which implies a forward PER of 17.5x and upside to
 
the current price of 38%. For a company experiencing
Implied Equity Value $305,922,898
  growth in productive capacity and that possesses Number of Shares 192,271,185
aggressive
strong cash Implied Share Price $1.59
  generating capabilities, we believe this valuation
to be justified.
  The company continues to merit our BUY Source: Imara Edwards Securities
recommendation.
 
 
Technical
  Indicators
 
 
When interpreting Bollinger Bands, the general appreciation is
  that prices are high at the upper band and low at the lower
band. At current levels, SeedCo’s share price is still below the
  middle and upper band, signalling a good time to buy.
 
On the other hand, the Relative Strength Index (RSI), which
  oscillates between 30 and 70 measures the price momentum of
  a security. RSI is a technical momentum indicator that
compares the magnitude of recent gains to recent losses in an
  attempt to determine overbought and oversold conditions of
  an asset. If the RSI approaches 30, it is an indication that the
asset may be getting oversold and therefore likely to
  become undervalued.
  At a reading of 40, SeedCo looks oversold i.e. undervalued by
  the market.
 
 
 
 
  Imara Edwards Securities/Meta Stock
Source:
 

13

 
SEEDCO - 5 YEAR FINANCIAL SUMMARY
 
31 MARCH
  (USDm) 2005 2006 2007 2008 2009 2010 2011F 2012F
Balance sheet
 
Shareholders' equity 12.3 4.3 14.1 29.5 52.0 57.0 72.1 86.1
 
Minorities 0.5 1.3 1.9 2.3 2.2 2.4 2.4 2.4
 
Total shareholders' equit 14.3 6.4 19.5 40.5 68.9 70.6 85.6 97.0
Interest  Bearing Debt 11.4 12.5 16.3 13.5 6.0 4.4 4.1 3.7
 
Trade creditors 6.1 2.1 1.3 1.6 3.5 5.2 6.9 8.3
Current  Liabilities 7.5 6.7 3.5 4.5 10.6 14.5 19.7 22.4
Total Liabilities and equi 33.2 25.7 39.3 58.5 85.5 89.5 109.3 123.2
 
Fixed Assets 8.0 3.9 16.7 30.1 46.6 37.0 43.0 52.0
 
Investments 0.0 0.0 0.0 0.3 1.2 1.1 1.4 1.6
 
Stock - Trade net 9.2 7.4 13.8 11.0 11.9 14.6 19.4 22.6
Debtors  - other 8.4 8.3 7.1 12.9 17.2 2.6 2.8 3.3
 
Cash at bank 4.9 3.5 0.2 1.3 3.5 9.6 10.1 12.6
Current  Assets 25.2 21.7 22.6 28.1 37.7 51.3 64.9 76.6
Total Assets
  33.2 25.7 39.3 58.5 85.5 89.5 107.6 123.2
Income  Statement
Turnover 53.3 33.8 39.2 52.8 53.9 77.0 108.4 123.5
 
COS 28.0 19.8 15.9 27.1 26.2 43.6 59.6 67.9
 
Gross Profit 25.3 14.1 23.4 25.8 27.6 33.4 48.8 55.6
EBITDA   11.4 14.8 12.9 15.0 12.9 17.4 25.8 29.4
  profit
Pre-interest 11.2 13.6 10.5 14.3 12.1 16.4 24.7 28.1
Pre-tax  Profit 11.5 11.9 7.8 11.6 16.7 17.9 26.2 29.7
Taxation  2.4 2.1 3.1 2.4 2.9 4.5 8.7 9.8
Attributable
  Income 8.7 9.4 3.8 8.7 12.9 13.4 17.5 19.9

 
Weighted shares (m) 191.2 191.2 191.2 191.2
 
EPS (USc) 4.5 4.9 2.0 4.5 6.7 7.0 9.1 10.3
 
Cash EPS (USc) 4.6 6.1 3.3 5.3 7.7 7.5 11.1 12.7
DPS (USc)  - - - - - 1.4 2.0 2.3
 
NAV per share (USc) 6.4 2.2 7.3 15.4 27.1 29.6 36.7 44.8
 
Growth  Ratios
Sales growth (%) 34.2 (36.4) 15.9 34.6 2.0 42.9 32.9 16.8
 
Pre-interest profit growth 21.0 40.1 26.7 27.1 22.4 36.1 65.9 23.3
 
Earnings growth (%) (30.9) 7.5 (59.0) 125.7 49.4 3.6 45.5 24.0
 
Margins  
 
Gross margin (%) 47.5 41.6 59.6 48.8 51.3 43.3 45.0 45.0
 
EBITDA margin (%) 21.4 43.8 32.8 28.3 24.0 22.6 23.8 23.8
Pre-interest
  margin (%) 21.0 40.1 26.7 27.1 22.4 21.4 22.8 22.8
Interest  cover (times) 6.2 7.6 5.3 3.9 19.4 29.9 26.2 25.1
Pre-tax profit margin (%) 21.7 35.1 19.9 22.0 31.1 23.2 24.2 30.3
 
Note: Financial figures for 2005 to 2009 were derived using the Old Mutual Implied Rate (OMIR), which may not reflect s true
 
account due to variability of exchange rates during that period.
 
 
 
 
 

14

 
 Notes
 
 
 
 
 
 
 
 
 
 
 

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This research report is not an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The securities referred to in this report may not
be eligible for sale in some jurisdictions. The information contained in this report has been compiled by Imara Edwards Securities (Pvt.) Ltd. (“Imara”) from
sources that it believes to be reliable, but no representation or warranty is made or guarantee given by Imara or any other person as to its accuracy or
completeness. All opinions and estimates expressed in this report are (unless otherwise indicated) entirely those of Imara as of the date of this report only and
are subject to change without notice. Neither Imara nor any other member of the Imara Group of companies including their respective associated companies
(together “Group Companies”), nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents
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© Imara Edwards Securities 2011

15