WHICH WAY THE TIDE? FOR A NEW listing exposed to infrastructural development, cable maker South Ocean Holdings hasn’t seen the gut-tingling share price surges that some of its compatriots experienced.
Its share price hasn’t shifted away from the offer price share range of 700c/share. Perhaps it’s because directors have offloaded a chunk of their personal holdings as part of the share placement exercise. Or maybe it’s that South Ocean lags – by a considerable margin – the market shares of its bigger rivals Aberdare and African Cables. OPPORTUNITIES • By our calculations, South Ocean – assuming the new share capital structure after listing – earned roughly 55c/share in the 2006 financial year. That puts the group on a historical price:earnings multiple of 12 to 13. If the group’s optimistic forward-looking statements can be read as realistic, the share doesn’t look expensive on a forward p:e multiple. South Ocean has an international partner (Hong Tai) that brings strong technical support and expertise to the SA business. RISKS • The fluctuating copper price. Though South Ocean’s prospectus explains at length the measures used to “accurately predict the copper price” that large input cost does remain a risk to margins (which, by the way, are rather impressive at over 18%). Increased competition. While South Ocean wants to increase capacity (and perhaps also make an acquisition or two), its bigger rivals won’t sit back and let a smaller player snaffle market share without a fight.