My selections: GDN: This small hotel and lodge operator in KZN is a value play at 90 cps, with net tangible assets of 74 cps and little gearing. GDN presents a nice entry into the tourism sector which is set for sustained growth over the medium-term, especially with the 2010 WC coming up. Based on expected earnings of 14.2cps to Feb'08 (a PE of 6.3x!)and a cover of 3x, a divi of 4.2cps should be declared which equates to a forward yield of 4.7%. GDN intends to add a new resort to its portfolio each year via acquisition. STO: This group which supplies analytical services for the precious metals exploration industry and are also active in fluid handling services and some manufacturing directed at the mining industry staged a remarkable recovery during the second half of 2007 after ridding itself of some disastrous and ill-conceived recent acquisitions. The balance sheet is now ungeared and at the prevailing 90cps, the rolling 12-month forward PE is estimated at 7.4x. The board rejected a takeover approach at this price last year. STO "anticipates meaningful real growth in HEPS" this year. ELR: This engineering outfit is probably one of the most neglected players in its field owing to the problems experienced in now disposed ELB Timbers which lost R42 m during the past 2 financial years. ELB Engineering Group is exceptionally well positioned to benefit from both the ongoing infrastructure spend in Southern Africa and Australia as well as the increase in capacities and efficiencies being implemented by the global resources and power industry sectors. Earnings of continuing operations grew by 98% last year. At 2000cps, the forward PE is estimated at 7.6x, a 35% discount to the market, while net cash comes to 413 cps. PPE: This fledging financial services group, headed by the entrepreneurial Mark Barnes is destined for great things this year as recent acquisition, Global Trader and new greenfields initiatives in the microlending and mortgage markets provide it with critical mass. The Global Trader acquisition, which expanded PPE's equity base to R370 m, in particular is expected to materially alter the earnings mix, providing an immediate and growing cash earnings base both in local and foreign currency. Other activities include treasury operations and private equity management. While the model has yet to prove itself, a historical PE of below 8x just seems too cheap for the excitement that could still follow, even allowing for the current adverse sentiment towards interest-rate sensitive stocks. PAN: This group with its diverse gold exploration portfolio is effectively a bet on a rising gold price as a hedge against inflation and a weaker US$. The recent acquisition of 74% of Barberton Mines provides the group with a production base and hence the ability to fund the ongoing organic growth in both its exploration and mining operations from internal resources. Gold exploration is currently occurring in Ghana, the Manica province in Mozambique and the Central African Republic. MTX has a 55% interest in PAN which provides it with access to the skills sets available in the larger group.
