- November 20, 2008
- Posted by: admin
- Category: Clothing and Textiles
Even though it’s difficult trying to write something useful about our (largely) directionless market at the moment, I can’t resist the temptation to look at some quick picks. Once again, I’m indebted to the analysts and portfolio managers at Imara SP Reid. Their views are concise, tend to be a bit different and I just like the way (often tongue in cheek) they say things.
I’ve only selected the stocks that Imara call “speculative” buys. You know all the warnings: spec buys are higher risk, etc. What’s attractive about the shares listed below is that probably all of them can be regarded as small caps. So if readers are interested in buying any of them, it won’t break the bank. But please remember, spec buys are higher risk.
* Seardel: Imara says final results showed the company under severe cash flow pressure from its major customer extending payment terms. “In addition, consumer negativity and size of the company debt will have inflicted slow poison on operating health.”
But it adds the rights issue fully underwritten by HCI “will probably do the trick”. Imara also likes its toy business.
* Taste Holdings: Interim results included one-month’s earnings from latest acquisition Natal Wholesale Jewellers (NWJ). It’s an odd acquisition for what’s essentially a branded food business but I’ve heard management argue convincingly about NWJ’s merits – and Taste managed to knock down the acquisition price.
NWJ tends to be a cash sales business, good in the current interest rate climate. And it’s not top end of the market, which might also be good. People can’t really stop buying jewellery for special occasions – but they can buy down. A further advantage Imara sees in NWJ is that it’s vertically integrated, with both retail and manufacturing activities.
Food brands are strong and also at the more affordable end of the market. People don’t stop eating take-away food in tough times – in fact, they probably eat more.
* Jasco: Interims showed focus on cost savings and efficiency rather than growing revenue. There’s also a new acquisition here – electrical business MTec. The share is favoured because the telecoms business in Jasco continues its expansion of networks in Africa and should benefit from ongoing liberalisation of telecoms in SA. “Expect ongoing Government spend in telecoms and electricity infrastructure.”
* Digicore: Not only do they provide security for motor vehicles but can also track and monitor just about everything a vehicle and its driver does. Imara says software is Digicore’s main competitive advantage.
Large tenders have been won, research and development is ongoing and growth is expected from SA’s Government departments.
Imara says some production has been moved overseas, which may reduce production costs. But it looks as if Digicore will be growing exports.
* PSV: I’ll quote the comment on this little AltX-listed company in full: “This stock looks set to beat expectations – and that after the price has fallen a very long way. It’s all overdone and value scavengers can look to spec buy.”
It’s a (natural) gas
It’s a subject I’ve touched on before and even for a hard-nosed cynic like me, I have to concede that environmental issues – the so-called triple bottom line view – are becoming vitally important for investors.
Last week I was informed that Corobrik, the country’s largest brick manufacturer, has become the first company in SA and sub-Saharan Africa to be awarded carbon credits by the United Nations Clean Development Mechanism.
At first I disputed that: I thought that Omnia and Sasol were already far down that road. But new Corobrik MD Dirk Meyer assured me the group was first and referred me to the appropriate website.
The confusion was probably on my part, because I thought Omnia and Sasol were already selling carbon credits. Maybe they’re announcing planned carbon credit sales before they’re actually awarded?
Meyer says Corobrik received the credits for switching from coal to natural gas firing at its Corobrik Lawley factory in 2004, resulting in an average reduction of 17 500 t/year of CO2 emissions. “Under the scheme, Lawley for the two calendar years 2005 and 2006 has been issued 35 130 Certified Emissions Reductions (CERs).”
Much like share certificates on a stock exchange, CERs can be sold. The scheme allows for developed countries to buy greenhouse gas emission credits from developing countries such as SA in order to achieve their emission reduction targets.
Corobrik has sold its carbon credits to Statkraft Markets Gmbh, a large electricity producer based in Germany.
A recent report I read estimated Omnia’s carbon credits would add about 100c/share to earnings in its next full-year results. This isn’t just an issue for Greenies but taken very seriously overseas and is targeted by shareholder activists.
So carbon credits add to a company’s investment value. You can’t invest directly in the no-longer listed Corobrik but it will be good for the business.
Source: Finweek – Shaun Harris