What would be the game plan here. This is as good a NAV play as you will find, as we have discussed before. Would your strategy buy purely on the fundamentals at these levels or would you wait for some price action? Personally, I think downside risk is pretty small, since it is already trading at 50% discount to TNAV, so all that is needed is an improvement on margin. A drop in margin is unlikely, and there is probably an 11% improvement on hte rand copper price, compared to last year - which they hold as a key driver for top line. The catch though, is that bad news will hurt, given how thinly traded the stock is.
I calculate TNAV at about R4? There should not be a big difference between TNAV and NAV with this (very few intangibles). I have very little - about R10k's worth. My question was not so much the value of the company, but whether you would bottom pick a small cap or buy on a breakout.
You need to try and find your level (as opposed to picking a bottom.) Buying on a breakout will almost always hurt you with these microcaps. They run like a wild thing and then reverse just as violently. Due to the poor liquidity. SOH broke and ran to R2,45 - now here we are back in the R160's. I suppose you could buy on the first major fpullback - so technically I suppose you should be considering buying not selling.
Actually, I think OST's NAV calculation already excludes the intangibles. So it is assets + stock + debtors + cash / issued shares - which is around R4 - but you have answered my main question thanks. I don't normally invest in small caps - so a specific strategy is needed, and breakout trading is not very successful, as you have demonstrated, and I have in turn experienced first hand.
FIXED ASSETS +current assets-long term liabilities - short term liabilities = nav - inatangibles (in fixed assets) = R2,50 per share or (equity - intangibles)(adjusted for treasury shares) / actual shares in issue (adjusted for tresury shares) = R2,50
I quite like the "feel" of this company - good cash generation / little debt / big primary investor / easy growth / limited share in issue / low cost cable manufacturer in a world where china cannot meet its own cable demand going forward. Good margins in her electrical wholesale division. Wholesaler of solar kit. A nice space to be in. I took a decent position at R1,50, so I share your frustration.
As previously discussed, the investment case for SOH is based on a number of factors viz. a market value less than a quarter of sales, a PE valuation <2x peak cycle earnings and a significant asset underpin. While the acquisition of Radiant brought considerable goodwill onto the b/s, true value is probably between the tnav of 251cps and the current book value of 471cps. Besides the positives mentioned above, I draw further comfort from the ample liquidity evident in a current ratio of 2.8x, low net debt of R72m and an int. cover of 7.5x. The favourable trend in the Rand copper price and significant recovery potential in the lighting business underscore the opportunity for substantial earnings recovery A- according to my estimates the rolling 12-month forward PE is <4. Once a deep discount share has satisfied my investment criteria especially among the smaller caps, I tend to take a position regardless of the technicals A- but I do trade some on the margin while waiting for value to be unlocked eg. I sold a quarter of my SOH holding above 200cps and am busy buying that back at current levels. While SOHA's share price performance has been anaemic so far this year, the point is that underlying earnings is continuing its recovery at a rate >20% p.a (which means that the PEG ratio is <25%!) and that will eventually be reflected in the market value. Perhaps a suitor might also pitch? Second liners tend to produce bulky returns but add significant alpha to your portfolio when they do A- their mix depends on your risk tolerance and patience.