Consumers the world over are looking for bargains ahead of Christmas, and local investors have their own bargain they can bank on with the announcement of a rights issue at banking group Capitec. In many cases, a rights issue sounds like a good idea at the time but when shareholders realise they are seeing their interests diluted they feel like they have drawn the short straw. Simplistically, a rights issue means that the company you are investing in needs cold, hard cash. The reasons for this vary. They could include settling debt, growing the business or bailing the business out of trouble. The problem with rights issues is that the managers of the company have decided that the shareholders will be the bankers, and an obvious question is: why are the shareholders the cheapest source of capital at that given moment? There have been a number of rights issues proposed or actioned in the last few months including Beige, Capitec, Buildmax, Metmar, Esorfranki and Capital Shopping Centres. However, Capitec's move looks like one of the smartest for value investors. With Capitec Bank Holdings [JSE:CPI] trading at around R150 at the moment and having risen by nearly 220% in the last three years, it has run as hard as it can in the near term; even the directors have taken opportunities in 2010 to cash in some of their shares. In Capitec's case you get one share at R125 for every 10 you hold, and the company will receive a R1bn capital injection. With a market capitalisation of R12.6bn, Capitec is still off the radar of many institutional investors, with just 11 asset managers holding the share at the end of the last reported quarter. It says a lot about private investor belief in the company that the share has been able to command a price to earnings multiple in the high teens and early twenties for the last two-and-a-half years at a time when many other small cap shares were marked down. A growing and debt-free Capitec with another billion in capital and increased liquidity in the counter could begin to justify this rating for longer. At a time when the market is looking tough to call, especially going into the festive season, Capitec presents a decent opportunity through this rights issue to get in on the long-term growth story ofered by this counter. - Fin24