Bat­ten­ing down the hatches

Finweek English Edition - - Companies & Markets - BRUCE WHIT­FIELD brucew@fin­

SHARE­HOLD­ERS ????? HAVE GONE OFF in­vest­ment houses and de­spite tempt­ing sin­gle-digit val­u­a­tions, they don’t feel com­pelled to rush back into the firms whose for­tunes are very closely linked to those of the stock mar­ket. While the likes of Old Mu­tual, San­lam and Lib­erty have taken flak in volatile mar­kets, it’s the smaller play­ers that have seen val­u­a­tions more than halve over the past nine months.

Pere­grine has seen the value of its shares drop off a cliff, Coro­na­tion has been plumb­ing new depths and spe­cial­ist in­vest­ment house Cadiz has also seen the value of its stock back at lev­els last seen in 2003.

Cadiz CEO Ram Barkai con­cedes in the group’s most re­cent an­nual re­port: “Cur- rent mar­ket con­di­tions may not be con­ducive to growth in the short term.” Clearly, ex­ec­u­tive man­age­ment is dis­tressed by its share price per­for­mance, but Barkai in­sists the group will con­tinue to fol­low a pru­dent approach ahead of the next growth phase in the mar­ket.

Trad­ing on a mul­ti­ple be­low five times, Cadiz has traded be­tween 200c and 467c/share over the past 12 months. The stock cur­rently trades at the lower end of that range, be­low its 2007 net as­set value of 243c. While its cur­rent NAV is at its high­est level ever, the re­al­ity is that in­vest­ment firms are clearly bull mar­ket stocks – Cadiz peaked at 600c in Fe­bru­ary last year but has been slid­ing since.

As­sets un­der man­age­ment – thanks to its ac­qui­si­tion of African Har­vest – have grown three­fold to al­most R50bn but it needs to man­age costs. Its cost-to-in­come ra­tio is the high­est it’s been in five years at 71% and em­ployee num­bers are more than 50% higher than they were in 2003. Barkai says the is­sue is a pri­or­ity, but the group is fo­cused on build­ing a base for fu­ture growth. He points to the fact that half of its cur­rent rev­enue comes from an­nu­ity in­come – which isn’t a bad place to be in times of un­cer­tainty.

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