BUY, HOLD, SELL
There are several new listings on the JSE for investors to mull over
LONG4LIFE Share price: 673c JSE code: L4L
BUY IM MIGHT USUALLY HAVE several misgivings about punting a much-hyped new listing as a “buy” — doubly so if there are no fundamentals to measure prospects by and the share price, at the time of writing, reflects a huge premium on the cash-only capital base. But Long4Life is no ordinary investment firm.
The prime mover is deal-making doyen Brian Joffe (pictured). It probably won’t be long before investors can gauge whether his Midas touch is still intact, as deals are likely to be bagged in the short term.
Long4Life is in advanced negotiations to buy 100% of beauty franchise Sorbet for about R130m in a share and scrip deal. Long4Life’s prelisting statement also noted that, in terms of the investment pipeline, there is significant scale and scope of opportunities in the market segments being targeted. The company has already identified a number of other opportunities.
Long4Life might become a focused investment vehicle rather than a diversified conglomerate like Joffe’s former enterprise, Bidvest. The prelisting statement noted the investment portfolio may comprise fewer than 10 investments at any given time.
What is perhaps most reassuring is that the terms of the remuneration scheme ensure the executive is in the same boat as shareholders. Joffe did receive shares at a discounted price of 400c/share ahead of the JSE listing, but that’s a small price to pay to have him work for your returns.
SEA HARVEST Share price: R13.60 JSE code: SHG
HOLD THIS FISHING COMPANY was recently partially spun out of empowerment company Brimstone and separately listed on the JSE. The listing coincided with the recent weakness in the rand, which has helped Sea Harvest trawl north of its prelisting offer price.
The company exports a chunk of its hake catch and has a controlling shareholding in Australian Stock Exchange-listed Mareterram (which holds a lucrative niche in the king prawn market).
Sea Harvest is solid rather than spectacular, with a dominant share in SA’s frozen hake sector. It enjoys decent operating margins, generates dependable cash flows and has a strong balance sheet. Operationally, it is geared for steady growth, having invested heavily in vessels and production facilities in the past five years.
But for now there is no compelling reason to snag Sea Harvest shares. Bottom-line profits will justify the current market rating — but the X-factor may only become apparent when Sea Harvest uses its empowerment credentials to bait fishing counters that feel their BEE credentials might be a disadvantage in the 2020 fishing rights allocations.
Sea Harvest probably has the capacity to take aboard two medium-sized fishing enterprises carrying values of R150mR600m. But IM expects deals may only start rolling in 2018. This is a worthwhile “hold” with intriguing long-term promise.
PEMBURY LIFESTYLE GROUP Share price: 95c JSE code: PEM
SELL THIS FLEDGLING PRIVATE school business did not get the warmest welcome when it listed on the JSE last month. At the time of writing, the share price had drifted below the 100c/share issue price, with market interest not exactly overwhelming.
The company offers an “early entry” alternative to JSE private education darlings Curro Holdings and AdvTech. The earnings multiples commanded by these companies do create a certain level of froth around private education ventures. Adding to this is the fact than even conservative investment companies like Trematon Capital and RECM & Calibre have tilted at the sector.
But at this juncture it is disingenuous to compare Pembury to Curro or AdvTech.
Pembury plans to set its schools’ fees at a notch below the affordable standard set by Curro. But the schools are smaller, and the mainstream sports offering is replaced by alternative sports codes that require considerably less infrastructural layout.
There is development risk in terms of entrenching the schools brand, establishing margins and raising capital for longer-term growth plans. Unless Pembury attracts an influential strategic investor — IM is aware of whispered rumours involving Long4Life — the market is likely to remain watchful in the company’s first 18 months since listing.
This means the share price could stay at current levels, or drift down in the absence of determined buying by serious players.