TRANSPACO

Financial Mail - Investors Monthly - - Opening Bell -

Share price: R18.60 JSE code: TPC

BUY IT MIGHT NOT BE TER­RI­BLY PRU­DENT TO tag Transpaco as a buy with its share price close to a record high.

But this tightly run company trades on a mod­est earn­ings mul­ti­ple of just over nine times, and has a rep­u­ta­tion for rather gen­er­ous div­i­dend pay­outs.

Sen­ti­ment has never re­ally been hot for Transpaco and that, IM would ar­gue, re­lates to lin­ger­ing per­cep­tions that the company op­er­a­tions com­prise mostly mar­ginal as­sets that larger pack­ag­ing groups no longer wanted. That is a gross in­jus­tice to Transpaco’s man­age­ment, who have shown over the past five years an abil­ity make smart ac­qui­si­tions and to eke out en­vi­able pro­duc­tion ef­fi­cien­cies as well as de­pend­able cash flows.

In a tough year to end-June, Transpaco man­aged a gross mar­gin of 34.5%, while the cash con­ver­sion rate was ex­cel­lent with R61m of the R69m net pass­ing re­as­sur­ingly through the cash flow state­ment.

The fi­nan­cial year ahead will again test Transpaco sorely. But hav­ing a strong bal­ance sheet in a stress­ful trad­ing en­vi­ron­ment is an ad­van­tage, and there must be plenty op­por­tu­nity for the company to pick up se­lected as­sets at more than rea­son­able prices.

As a pack­age — solid div­i­dend yield, un­de­mand­ing mar­ket rat­ing, no-non­sense man­age­ment and po­ten­tial for cor­po­rate ac­tion — Transpaco re­ally ap­peals.

It edges out long-time mar­ket dar­ling Bowler Met­calf as our buy.

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