CASH AT A DISCOUNT

[THRESHOLD]

SKAAPTJOP - Have a look at this - accumulating from 50c, looking at adding a few more. Not my favourite sector and lots of issues but surely priced in at these levels. Looks cheap at around 3x cash gen. and 4 x forward earnings and in a popular sector. Worth a punt - R500K hopefully becomes around R1,2M in a year or so when PE normalises.

[topgun]

Not so sure about the heading. The fact is that the GIJ balance sheet exhibited net cash of R126.7 m 2 years ago versus net interest-bearing debt of R216.3 m (i.e. a R343m reversal) in the latest set of results after the WAIO fiasco A- which incidentally indicates poor operational execution and deficient risk management. (EOH may also become a more significant contender in this space after its latest acquisition). Nav has simultaneously declined from 43.8 cps to 27.6 cps with tangible nav now a mere 11.5 cps. While near-term recovery may be in the offing, this one certainly requires a punter with above average risk tolerance and is unlikely to attract institutional support any time soon given its patchy track record.

[THRESHOLD]

The risk is what creates the opportunity. NAV (and certainly TNAV) are of practically no relevance to IT stocks. My figures are based on managements projections post the WAIOL debacle. So this is already "baked-in". I would not buy this for the management but if the forward cash and earnings figures are correct, this stock will rally. There is practically no institutional interest in any of these microcap thingees. The institutional investors arrive once the figures provide a track record. By this time - the punter would probably be looking to offload.

[THRESHOLD]

Oh yes, and I was referring to the cash generating abilites of the company. The on balance sheet cash has been consumed in attending to this WAIOL mess.

[topgun]

Fair enough, but in a volatile sector such as IT I would prefer to back a company with a more sustainable earnings record and less management risk. Coming back to the heading, have a look at the latest ELR balance sheet - net cash per share 1633 vs. a 2000cps share price!

[THRESHOLD]

I carried this thing (ELR) from R7 to R16 and then sold in the hope of a pullback. Too early. I wish you hadn't sited this company since it ticks a lot of the boxes for me so I have nothing to argue about. Still - a portfolio is made up of more than just one share and GIJ should outperform ELR if it gets going. GIJ should also offer a more consistent, reliable cashflow on services as ELR's income is mostly based on one-off contracts or sales of her agency equipment. As a result GIJ should prove more resistant to recession - an effect which came through in the results of the international IT sectors in the 2008-2010 period.

[THRESHOLD]

For a cycical play look at PGR. 60% of its market is carried in cash. AND its a bank!?

[THRESHOLD]

Not withstanding my comlaint about citing ELR - given the miserable dividend - largely as a result of extensive capital commitments - there might still be another buying opportunity in our futures.

[THRESHOLD]

Notwithstanding...

[#10]

That is the problem with thinly traded stocks - practically impossible to pick them up at a discount, because nobody is selling with any real volume. So the price you see is just one end of a large spread trading.

[topgun]

Agree with PGR but fortunately sold out a while ago at the onset of the renewed cyle of volatility - will look to re-enter both ELR and PGR in coming months once the dust settles, hopefully at bargain basement prices?

[THRESHOLD]

BUT in a "real" crash - oh boy - these things get dumped at just about any price. That's when the patient value investor gets to make real money.

[Marno_1]

GIJ still showing good progress. Glad that I have took the risk on this one. What do the people think that follow GIJ. Can we see 70c soon.