Watch Caxton
Caxton and CTP Publishers & Printers, which is still earning most of its keep from newspapers, magazines and printing and packaging, could well be regarded as the antithesis of Naspers. Whereas Naspers has been ripped away from its print-media roots by an array of technology investments, Caxton still seems content to tinker with its (wellmanaged) traditional operations.
That’s not to say there’s not much to like about Caxton. In fact, there may be more than a few contrarian market watchers who prefer the conservative vision of Caxton prime-mover Terry Moolman to the all-conquering global thrust of Naspers chair Koos Bekker.
Caxton, on a trailing earnings multiple of around 10 times, may seem a fair rating, noting the changing media landscape. It’s worth noting the company’s operations are still churning out convincing free cash flows, and the allocation of this capital will determine Caxton’s long-term viability. The fair value of cash and cash equivalents topped R1.9bn, with cash generated by operating activities increasing over 20% to R782m — equivalent to around 195c/share. There was a R356m investment in property, plant and equipment – a large portion of this earmarked for the packaging divisions to facilitate a restructuring of the Gauteng operations. Caxton also made several acquisitions during the year, spending R158m. Perhaps the most eyecatching event is listed under the R85m investments and loans to associates. Though the most significant seems to be a 30% investment in Universal Labelling, the far more intriguing tilt is the shareholder loans made to “rapidly growing” fibre-to-home associate Octotel.
Caxton notes that Octotel will have connected more than 50,000 homes by the end of the year, making it the Western Cape’s largest independent open access fibre operator. Post-balance-sheet events may also raise market interest. Though the R11m acquisition of self-adhesive label business Tricolor in the Western Cape reinforces the old-economy tag, Caxton made a big move in clinching a 50% stake in Private Property SA, one of the leading digital real-estate portals, for R123m.
Caxton is clearly a business at an interesting juncture. I suspect the share price, which (aside from an odd spike) has dribbled downwards for five years, may find some traction fairly shortly.
Safety in numbers
Stellar Capital Partners (SCP) has pretty much been defined by its investment in Jse-listed Torre Industrial. That masks the fact the company did a rather good deal in buying out security technology firm Amecor, now apparently the subject of two takeover bids by other investment companies. Amecor delivered normalised earnings before interest, tax, depreciation and amortisation (Ebitda) of R52.3m for its year to end-march — justifying SCP’S purchase price of around R270m. If Amecor is for sale, could SCP — noting prevailing economic conditions — ask north of R300m? Market talk is that SCP may be offering Amecor in a package deal, with the stake in electronics manufacturer Tellumat tossed in as well.
Over the rainbow
RCL Foods is still counting on chickens, and executives seem determined to dismiss notions that the Rainbow poultry business will be put up for sale. This is despite the industry looking anything but the picture of plump prospects, with cheap imports still flying in and an illtimed outbreak of avian flu.
RCL’S recent results, though, did show the poultry segment looking slightly pluckier, with a stronger second-half performance. The business model change — which will result in a volume reduction, with quick-service restaurant offerings favoured over commodity offerings like individually quick frozen — will hopefully yield further margin improvements.
It’s encouraging, too, that RCL’S chicken business is once again excelling in the “freezer to fryer” section, where market share at the end of June grew to a category-leading position of almost 40%.
It’s worth noting that the company’s operations are still churning out convincing free cash flows