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Undervalued by far?

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Newbie
Contributor
I follow this share in my portfolio and maybe someone can answer a question; Esor sold the geotechnical division for R500 million and it constituted 33% of the business. The NAV was at almost R3 a share meaning after the sale the NAV should be about R2. Let's be fair and halve that as cunstruction is a risky sector. So a R1 share is at R0.55. But add to this Keller has agreed to pay a further amount not to exceed R150 million. If this was to be paid as a divident again, it would be R.038 cents a share. If this happens, the actual share price is about R0.15!!!! Can anyone follow my reasoning?
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4 REPLIES 4
Frequent Contributor
Ja,perhaps you are onto something. Coronation hold 10% and Sanlam 9%. But how definite is the future Keller payment? Mkt really doesn't like this thing. R53 is a v long way down from the 2010 high of R490. I got out at R124 and won't return until Mr Mukkit gives some sort of reason/prompt to, but your point about valuation is well made - will be watching.
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Chopchop
Contributor
I bought some a few weeks ago at 65 cents, it is trying to catch falling knifes though should rather has waited until the price starts making higher highs. I think investors are probably worried about the 3 loss making contacts that lead to the fall of earnings in the last set of results. It is crazy cheap though no matter how you look at it.
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Highlighted
Super Contributor
When ESOR was founded, that is what they were, specialised Geotechnical engineers and because of their rare skills and specialisation employed could command decent margins. The only decent division they had,they therefore sold to raise cash. Therefore, when the market turns, they will no longer have that base to use as a lever and will have to fight it out for the low margin stuff. In my view the share is therefore fairly rated. Dont expect fireworks.
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Newbie
Contributor
Thank you for the feedback. I also looked at the Geotechnical division as a core part of their success, but the loss-making ventures were in the last set of results and I can find no indication that this will happen with the next results (hold thumbs). I see it is down to 52 cents this morning. I also bought at 65 cents but I am tempted to put in a purchase order if it reaches 50 cents. I truly believe they will have at least 150% increase in HEPS in the next set of results. The big companies that hold a chunk of this share also gives me peace of mind. I also see the head huncho bought another chunk of shares when it dropped so low. I actually had my finger on the "sell" button when the share went up to R2 just before it went ex-dividend. I still think I made the right move for the short-term (three years). Time will tell I guess!
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