Finweek English Edition - - Companies & markets - MARC HASENFUSS

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.

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