Share price: R99,88 JSE code: AFE
BUY WHILE THE SHARE PRICE IS NEAR ITS low after losing 16,1% over the past year, all the important metrics are moving in the right direction for AECI.
It is spending just over R1bn on acquisitions, which CE Mark Dytor says are helping the bottom line.
Gearing is down to 20% (22%) and the trading margin has firmed to 11,5% (10,2%). The interim cash dividend of 125c was 9% better than the 115c that was paid in the previous interim period.
AECI is also waiting for R400m to come in from selling land at Somerset West. Property transactions have been big for AECI — last year it made a profit of R421m from a bulk land disposal at Modderfontein.
The acquisitions are aimed at strengthening one of AECI’s three main businesses of explosives, speciality chemicals and property, and ultimately at further improving profitability.
AECI has a diversified geographic spread, with operations in Africa, Australia and Indonesia. $11m was spent on the Farmers Organisation in Malawi. The company also spent R235m on Southern Canned Products, a juice business in the Western Cape. Earlier it paid $23m for a 42,6% stake in Indonesian chemical firm Black Bear Resources Indonesia.
But AECI makes most of its money from speciality chemicals, accounting for revenue of R4,39bn and operating profit of R532m.
On a forward PE of 9,9 times, nearly the same as the historical price:earnings ratio, entry into AECI is fairly cheap at the moment, and that’s what makes it a buy.