Just after reasonable results announced on 11 June slumped from 15 PE to 10 PE currently. Turnover up, HEPS up 21%, African footprint, low gearing, and NAV of 88cps. Is this just as result of further expected decline in steel demand globally or is there something fundamentally wrong with this company?. Ok directors sold a few shares but that won't bother the informed money surely?...anybody have more insights?
this company has a market cap of under R400m, so not really registering as blip in most asset managers' radars. And it manufactures a product that is expensive to make, (raw materialis, electricity and SA labour) and expensive to sell (no branding, central manufacturing, heavy (so expensive to distribute). I would be interested if they were actually manufacturing elsewhere in Africa, which IMO, is the only sustainable way of doing business in most African countries. Not saying it is a bad company, I just don't think its strategy fits with my philosophy of companies that will deliver the ten bagger.
While I concur with skaaptjop in a very rudimentary way, I think there is opportunity with this one. Yes some Directors have been dealing, but if one pays close attention you will see a pattern emerging. While some directors are selling, Battershill (CEO) is buying in the trough. It seems cyclical, as he sells a bit on the current peaks of between 80 & 90c. As percentage gains this can be substantial. The NAV negates the risk somewhat and they have also identified some erroneous ventures that will be rectified. Key however is their growth in very challenging conditions and significantly reducing cost basis per tonnage. It's Alt-X, but it has opportunity and upside to keep it in the mix. Just my 2c.
As far as I know, they do not manufacture but are a steel distributor. To me they seem high risk - soft economy, steel strike, low margins = low returns, high debt and nearly 30% of total assets is debtors? Furthermore, management does not seem to be too entrepreneurial - I think the last corporate activity was in 2010 and they now looking at commodity trading to try and boost profits. This ain't an easy task being highly specialised and does not seem a good fit with what they do. IMO, there are better growth opportunities elsewhere.