OM­NIA

Financial Mail - Investors Monthly - - Opening Bell -

Share price: R170,50 JSE code: OMN

HOLD THERE’S ONLY ONE REA­SON OM­NIA IS not an out­right buy. Two of its ma­jor busi­nesses, min­ing and chem­i­cals, are not do­ing that well. But it’s due to fac­tors be­yond its con­trol; for ex­am­ple, CE Rod Humphris says min­ing oper­a­tions in West Africa are un­der pres­sure, with mine clo­sures, Ebola, and a con­tract that Om­nia lost. Over­all, softer de­mand pushed min­ing vol­umes down by 2,7%.

Om­nia op­er­ates in 16 coun­tries in Africa, Aus­tralia, Brazil, China and Mau­ri­tius.

Right now it’s agri­cul­ture that is driv­ing the busi­ness. Humphris says it’s about de­liv­er­ing yield. It helps farm­ers to im­prove yields and their qual­ity.

Om­nia is big on tech­nol­ogy. It uses drones to fly over and check or­chards, look­ing for a pos­si­ble lack of nutri­tion or mois­ture. Such de­tail main­tains the high stan­dard of the agri­cul­ture busi­ness.

In full-year re­sults to the end of March, Om­nia de­clared a to­tal div­i­dend of 490c, up 3% on the pre­vi­ous year. That looks a lit­tle stingy. Per­haps share­hold­ers de­served more.

Higher pro­duc­tion and sales vol­umes moved the op­er­at­ing mar­gin in agri­cul­ture up to 9% (6,5%), again mak­ing the guid­ing tar­get of 8% to 10%. In min­ing the op­er­at­ing mar­gin went down to 13,5% (15,2%) and in chem­i­cals the mar­gin de­clined to 2,4% (3,8%).

When these busi­nesses turn around — though min­ing may take some time — Om­nia will be fly­ing like one of its drones.

The share price has taken a hit the past year, down 26%. Yet a for­ward PE of 13,1 times looks at­trac­tive.

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