Worth keeping an eye on this logistics David

ogistics specialist Santova has delivered some impressive numbers in the past five years, but it hardly registers as a blip on the institutional investors’ radar screen.

Investors Monthly counts just a handful of unit trust funds — most notably small-cap expert

LKeith McLachlan’s Alpha Wealth Prime small- and mid-cap fund — that have loaded up smallish parcels of Santova scrip.

The company does find itself in a difficult position with investors more likely to fixate on larger “mobility” counters such as Grindrod and Trencor. Those willing to cast their glances into left field will probably latch on to the recovery potential of Onelogix or Value Group before perusing the prospects of Santova.

Retail investors will probably also be wary of pushing the buy button when Santova’s share price still trawls much closer to a new high than its 12-month low.

IM, though, contends there is still considerable upside potential in Santova’s shares — which are hardly excessively rated on a trailing earnings multiple of around 12 times.

On paper, prospects don’t appear encouraging for a company increasingly plying its trade on the global stage. Logistics contenders are facing stagnant global trade volumes and there is increased competition (with new entrants in the local market) that could trigger price wars, thereby crimping margins.

Over and above this is the overcapacity in the ocean and airfreight sectors, which could lead to consolidation through mergers and acquisitions.

But Santova’s investment presentation intimates that prevailing trading conditions may suit the tech-savvy, service-driven company as clients adjust to changing sourcing locations and points of sale as well as entertaining smaller, more frequent purchase orders.

Thanks to some smart technological innovations in creating a one-stop services offering to global clients, the company has carved an enviable niche and a fairly formidable reputation as a nimble provider of tailor-made solutions.

Santova’s year to end February results certainly suggest that plans to capitalise on opportunities in a competitive logistics market can’t be dismissed as overly ambitious.

The company fattened net margins to 7.3% (6.5% previously) — with an intense focus on higher-yielding airfreight project shipments, supplier consolidation and rate re-negotiations offsetting pressure on foreign operations (where a decline in freight rates in the UK eroded margins).

The geographic spread of business has now also taken on more reassuring diversity. Though 45% of profit before tax was earned in SA, a chunky 23% was generated in the UK, 20% in the Netherlands and 10% in Australia. If the recent acquisition of the Tradeway Group is factored in, then local profits reduce to 37% with the UK elevated markedly to 34% and the