Share price: 115c JSE code:
BUY ISA HOLDINGS IS A LOW-KEY SECURITY technology specialist that has largely built on its core competences rather than embarking on bouts of corporate action to bulk up and diversify its operational base. The record will show that ISA’s singular focus has served it well, albeit that performance and returns have been steady rather than spectacular. A recent cautionary notice, subsequently withdrawn, sparked speculation that ISA might be bought out, though the unspecified talks it cited may well also have referred to a small acquisition.
In holding a market capitalisation of less than R200m, ISA could be perceived as an appetising morsel for bigger technology or service companies. ISA also presents a compelling fundamental story, trading on a trailing earnings multiple of about 13 times. While not dirt cheap, this is unduly modest given its profit record, reassuring cash-flow generation and longer-term prospects. And the key growth drivers of the information security market are unlikely to stall.
After releasing solid year-to-end-February results earlier this year, CEO Clifford Katz — who certainly runs a tight ship — reckoned that, by leveraging positive sentiment towards the information security market, ISA is “likely to deliver above-average tangible returns over time”. A recent trading statement for the six months to end-August reinforces Katz’s view, with ISA expected to report headline earnings of about 7.2c/share — up 20% on the corresponding period last year.