SA firms a bargain for foreign buyers

Well-run small and medium-sized companies in SA are set to attract international investors looking for cheap but valuable targets, say analysts.

Well-run small and mediumsized companies in SA are set to attract international investors looking for cheap but valuable targets, say analysts.

They say subdued economic growth and subsequent lack of liquidity has brought down company valuations in key sectors and investors taking a longterm view may want to take advantage of this.

Last week MilCo, a consortium of investors led by Israelbased Central Bottling Company (CBC), made a R4.8bn offer to buy Clover, shining the spotlight on the attractiveness of some of the country’s well-established but undervalued companies.

The bid for Clover follows France-based waste management company Séché Environnement’s announcement in November 2018 that it had made a firm offer to buy JSE-listed Interwaste for R1.20 per share.

Cratos Wealth’s Ron Klipin said local firms had to contend with lack of confidence and illiquidity. “This may result in some of the better-quality, undervalued shares becoming targets of private equity funds which are looking for long-term bargains.”

Frank Kahumba, equity analyst at Momentum Securities, said Clover had solid brands and was still set for further growth and expansion.

He said CBC was interested in Clover because the branded foods and beverages firm was well-run.

Sasfin Wealth deputy chair David Shapiro said corporate activity in the medium- and small-cap sector was likely to pick up.

“Undervalued or distressed companies will be snapped up either in mergers with existing companies or taken out by private equity.”

Byron Lotter, a portfolio manager at Vestact Asset Management, said better-performing local companies are likely to attract the interest of suitors in search of value in stable companies. “This comes with risks but the risk is often priced in.”