The options spread
A handful of recent listings have broadened the investable telecoms universe
UNTIL FAIRLY RECENTLY investors seeking exposure to the fast-growing telecommunications market only really had a choice of two: Telkom and MTN. However, the universe of shares has swelled lately after a number of new AltX listings. And as the lines between IT and communications become increasingly blurred, other opportunities will also open up.
Of course, risk-averse investors and larger institutions – many of which normally don’t invest in AltX companies – would say the options remain limited.
However, telco investors must be prepared for a little risk. And for fans of the AltX now there are at least a number of choices, including cellular product and technology company Celcom, African Cellular Towers and, most recently, routing business Telemasters. You could also include call centre business Dialogue Group and must definitely not forget fast-growing alternative telco Datapro, which listed in 2004 and recently completed the significant purchase of routing company Orion.
According to the FTSE/JSE classification system, two other companies fall into the telecoms landscape, more specifically telecommunications equipment: Altech and Foneworx.
With subsidiaries including large independent service provider Altech Autopage Cellular, leading vehicletracking company Netstar, and Alcom Radio Distributors and Alcom Matomo, Altech offers pretty well rounded, indirect (in the sense of it not being an operator) exposure to the telecoms sector.
Despite the relatively new name, Foneworx isn’t a new company but the business of Interconnective Solutions, which put the name change to shareholders in November 2006. The small company said that would more correctly reflect its marketing strategy and align the listed name to its main trading name.
Foneworx – which offers a variety of automated “infotainment” and business services, such as online surveys and Fax2Email over a proprietary voice and data platform – recently posted positive interim numbers and said it was considering an imminent move from the main board venture capital market to the AltX.
New listing Telemasters CEO Mario Pretorius says it went public to raise its profile to potential partners and customers ahead of possible capital raisings at a later stage. Those would be aimed at consolidating the market, says Pretorius, adding that it wanted to be a “shark” rather than end up being eaten.
Telemasters only floated 15% of its shares – Pretorius owns the rest – offering them at a low 50c/share, mostly to dealers and staff. The price is now 285c/share (pushed up on only 678 518 shares traded over the first few days).
Pretorius concedes there would have to be substantially more shares available if it wants to do deals. A few financial report- backs and a higher free float would undoubtedly make the listing far more interesting to individual investors and any institu- tions mandated to invest in AltX companies.
Last year’s three telecoms-related listings – African Cellular Towers, Dialogue and Celcom – have all seen healthy increases in their share prices. Dialogue recently reported maiden full-year numbers to December 2006, showing strong growth and good cash generation. It said it was confident of meeting pre-listing forecasts for 2007.
African Cellular Towers posted promising interim results to August 2006 late last year and the market will no doubt be looking out for maiden full-year numbers to February early this year. Celcom and Telemasters have yet to report maiden results as listed entities.
DataPro, whose progress was recently well documented in Finweek, continues to perform on the back of the Orion deal and prospects for voice revenues. The shares, which ticked up gradually last year, have almost doubled since the beginning of this calendar year.
Other shares that investors can buy for some exposure to the sector include Dimension Data (for Internet Solutions), Reunert (for Nashua Mobile) and even Jasco, which has positioned itself to benefit from the increasing roll-out of broadband.
Spescom has an attractive call centre business called DataFusion, but the holding company hasn’t been a good performer of late and there don’t seem to be any immediate plans to list the subsidiary separately.