THE GOOD, THE BAD & THE UGLY|
DÉJÀ VU (IT’S ALL RELATED) WE’VE FREQUENTLY compared the vibrant stock market sentiment concerning the AltX and new listings to those heady days of the late Nineties (when every man and his laptop dashed on to the JSE). Others say it’s different this time… and that remains to be seen.
But we couldn’t help feeling déjà vu when perusing a notice from African Cellular Towers FOLLOW SABVEST’S EXAMPLE. PLEASE! TRADING UPDATES are becoming increasingly contentious; some are published minutes before the release of actual audited results, others are misleading and some are too complicated. In that regard you have to congratulate investment trust Sabvest, which managed to publish a rather sensible trading update to shareholders last week.
In a notice that was plainly set out, Sabvest advised that headline earnings would be up 138% to 176c/share and earnings by 150% to 178c/share. The group also disclosed the dividend would double to 12c/share.
Issuing such a clear and concise trading update reflects well on Sabvest’s management systems and on the way the company is run generally. We sincerely hope more listed companies follow its example… highlighting the acquisition of JK Shelters for R40m.
The deal – payable in a combination of scrip and cash – hinges on JKS achieving a warranted profit of R8m for the year to endFebruary 2007. That would put the buy on a modest forward price:earnings multiple of five times.
While JKS apparently complements AC Towers’ cellular phone tower business, the acquired company is also 66,6% controlled by an AC Towers director.
Such related party transactions – involving a director selling a business he/she owned or partly owned – into the listed company was rather common among the technology listings of the late Nineties. Of course, the difference this time is that at least the related party is disclosed up front and warranted profits are pencilled in for all to see. AT SIXES AND SEVENS LAST YEAR Amalgamated Electronics Corporation (Amecor) – to satisfy demand for its tightly held shares – placed 6m shares with six institutions at a price around the 220c/share mark.
At the time of writing, Amecor – despite reporting solid interim results to endSeptember – sits between 160c and 170c/share.
The group traditionally enjoys a stronger second half – which begs the question: “Why the fizzled share price?”