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.