From the beginning of September to the end of November there were 26 new listings on the JSE — a whole mixed bag of them, too.
The performances of the various listings is a reminder to investors that everything that lists is not necessarily a good investment. But if you choose your companies well it is an opportunity to get in at the beginning of a successful growth of a company.
But how have the newcomers faired and what are their prospects?
Diamonds:
RACEC up 60% since listing on AltX
Has provided railway and electrical infrastructure since 1956.
Prospects: Will benefit from Spoornet’s revamp, as well as electrification of new township developments.
Valuation: Share price of R1,60 puts it on a forward p:e of 10X, below the average forward p:e for the construction sector of about 17X.
Ideco up 13,6% since listing on AltX
Focuses on identity management with biometric technology. Responsible for the digital conversion of paper-based fingerprint records for home affairs, with a world record of 135 000 conversions a day.
Prospects: It has a 14-year contract with the SAPS to provide information for every criminal background check on a transaction fee per search. On the negative side it listed only 20-million shares, so liquidity is an issue.
Valuation: At a share price of R1,25 it is on a forward p:e of 9,4X, well below the industrial average forward p:e of 14,5X.
SA French up 47% since listing on AltX
Provides cranes to construction firms. It has exclusivity in Southern Africa to sell tower cranes manufactured by Potain, the world’s largest manufacturer.
Prospects: Most cranes in South Africa have reached their life expectancy of 25 years and will need to be upgraded.
Valuation: This company was considered cheap on listing with a forward p:e of 6,8X. At a share price of R1,47 the current forward p:e is 10X.
Blue Label Telecoms up 22,1% since listing on Main Board
Distributes pre-paid secure electronic tokens for airtime, electricity and bill payments. It has cornered the market in pre-paid airtime and in six years built up a company worth R5-billion on listing.
Prospects: The pre-paid cellphone industry still has a great deal of upside, especially into Africa where the penetration is not as high as South Africa. It has entered India also, which offers outstanding prospects.
Valuation: This share price is looking a bit stretched pricing the business at a forward p:e of 24X. It will have to continue to grow profits aggressively to maintain the valuation.
TWP up 39,6% since listing on Main Board
A mining services and project management company — it sets up new mines and manages mine closure in line with environmental requirements. Internationally it has offices in Australia, Turkey and central Asia.
Prospects: As more mines are opened with higher commodity prices, TWP is well placed to benefit from this. It has R50-billion of projects in the pipeline up to 2017.
Valuation: The valuation on listing was expensive, but fund managers like the business a great deal. At a share price of R21,90 it has a forward p:e to February of 24X. However, further out to 2009 forecast earnings, its forward p:e will be 13,8X.
Dogs:
Hardware Warehouse down 23% since listing on AltX
This is effectively a hardware store business for the low-cost building trade, based in the Eastern Cape. The value of its listing was not clear and it raised only R15-million, putting pressure on liquidity. Opinion is that it took advantage of the hype around construction. The chief executive has bought shares in two small transactions, which might be seen as propping up the share price. A chief executive should be focused on profits, not share prices.
African Brick Centre down 22% since listing on AltX
Manufacturer of premium clay bricks (facebrick). It has been hurt by the lack of growth in the upper end of the housing construction market versus a company like Brikor, which manufactures cement bricks for low-end housing. Based on its interim results it looks as if it will miss its annual earnings forecast, which is a kiss of death for a new listing.
DVT down 13% since listing on AltX
Software specialist company. While the IT space has been a lucrative one with many larger players seeing significant share price growth, this is a small player which has to compete with larger companies for skills and larger more lucrative contracts.
Telimatrix down 17% since listing on Main Board
Vehicle tracking and advanced fleet management. Matrix is its best known brand. This was not a capital raising exercise, but rather to facilitate the purchase of OmniBridge from Control Instruments using listed shares. The slowdown in car sales is a cause of concern and the directors were required to provide a listing price, but it would seem that they are a bit ambitious in their pricing. There was no private placement but those investors who paid R1,80 during its first two days of listing must be pretty unhappy.
Universal Industries down 4% since listing
Manufactures and supplies baking systems and refrigerated display cabinets. In July this year the company bought household name MacAdams, which supplies equipment to large bakeries. The numbers don’t add up. It paid R280-million for MacAdams, which makes up 66% of the company’s total profit. With a listing market cap of R720-million, it priced MacAdams at R475-million for investors. This does seem like an opportunity to have made a quick buck.