Showing steely promise
ALTHOUGH FERROUS and non-ferrous alloys supplier Insimbi announced in July it was “reasonably certain” it would achieve its pre-listing estimated earnings in the six months to August 2008, the market hasn’t been very kind to the share.
Insimbi now says its earnings for the current financial year would be up to 23% higher than those predicted prior to the listing in March. It had forecast HEPS of 14,54c for February 2009, implying a higher 17,88c/share HEPS come February 2009. At its current price of 90c/share (one of a few AltX listings trading above its placement price) Insimbi has a built-in earnings multiple of 5,03 times. Investors would get a further 7,27c/share back in dividends next year, paying a net 82,7c/share for an earnings multiple of 4,62. Does anything get any cheaper than that? Insimbi has also com- mitted to a dividend cover of two times as future policy.
Insimbi says the reason for the higher numbers are higher commodity prices, which are above those forecast in its prelisting statement. Insimbi has also done its part to fully take advantage of the higher commodity prices.
Roughly R32m of the proceeds of the share placements was used to settle bank and shareholder loans. Another good portion of the R46m raised paid for the acquisition of a 300t aluminium smelter in Boksburg, taking its smelter capacity to 900t. Further reconfiguration and streamlining of the plant (and an existing one in Benoni) increased total capacity to 1 300t.
With its corporate eye cast as far as Ukraine for growth, Insimbi says its new steel mill in Zambia’s Copperbelt will serve as a springboard into promising parts of southern Africa, such as the Democratic Republic of Congo. Founded in 1970 and with the last 16 years of uninterrupted profitability – the past five with compounded growth exceeding 20%/year – this is a share with which to anchor your portfolio for steely long-term growth.