Zimbabwe Stock Exchange-listed ZECO Holdings in a strategic focus change move

ZSE-listed ZECO Holdings targets residential and commercial property

  • The debilitated railway system meant doom for ZECO’s prospects
  • A largely informalised Zimbabwe Mining sector is another cause of concern
  • A soon-to-be-held AGM is set to ratify the proposed change

The Zimbabwe Stock Exchange (ZSE) listed firm, ZECO Holdings, has written to its shareholders seeking permission to strategically change its focus from stock rolling to residential and commercial property investment and development company.

The company’s recent circular to its shareholders shows that in order to unlock shareholder value, the Board of Directors has resolved to change the strategic focus of ZECO Holdings Limited from a Rolling Stock company to a Residential and Commercial Property Investment and Development Company (“strategic focus”).

“The new strategic focus will enable the company to participate in the growth prospects of the Property Development sector, which appears to have better prospects than the Rolling Stock industry,” reads the circular.

The change in strategic focus was achieved through the disposal of the Company’s Rolling Stock Assets for an amount of USD 4,500,000.00 (“The Disposal”); and the purchase of residential Land, comprising two (2) residential pieces of land measuring 3.6395 hectares with all the developments thereon, situate in the district of Salisbury, called Quinninton Township for a total price of USD 2,150,000 (“the Acquisition”).

This development comes after trading of Zeco’s securities on the ZSE was halted in February 2022 due to the company’s failure to notify the ZSE and its shareholders of a significant transaction whose impact affected its trading operations. However, the suspension was lifted shortly after the company met the consequences of its actions.

At the time of its Initial Public Offering, ZECO Holdings Limited’s primary business involved the assembly and refurbishment of locomotives (steam/ diesel/electronic), the manufacture and refurbishment of railway wagons, Granby cars, coco pans and skips for the mining industry (hereafter referred to as the Rolling Stock).

The growth of the Company was predicated on the then anticipated revival of the National Railways of Zimbabwe or its anticipated privatisation. The uncertainties surrounding the railway transportation industry over the years, the closure of many mines, and the informalization of the mining sector have put paid to the Company’s prospects as a Rolling Stock Company. As a result, the company’s shareholders have gone for years without enjoying any capital appreciation or earning a dividend from their continued investment in the rolling stock business.

Additionally, when Zeco Holdings Limited was listed on the ZSE in 2008, Demand for rolling stock products in Zimbabwe was primarily driven by the National Railways of Zimbabwe (NRZ) and the mining sector. The uncertainties surrounding the railway transportation industry over the years, the closure of many mines, and the informalisation of the mining sector have put paid to the Company’s prospects as a Rolling Stock Company. As a result, the company’s shareholders have gone for years without enjoying any capital appreciation or earning a dividend from their continued investment in the rolling stock business.

“In order to maintain the sustainable growth and profitability of the businesses going forward, the Board has changed the Company’s strategic focus from a Rolling Stock company to a Residential and Commercial Property Investment and Development Company. Rolling Stock industry,” reads the circular.

As a result, the Directors propose to convene an EGM to be held on 17 August 2022 to seek Shareholders’ ratification of the change in the strategic focus of ZECO Holdings Limited from a Rolling Stock company to a Residential and Commercial Property Investment and Development Company.