A self-pro­claimed op­por­tu­nity…

But how will mar­ket re­spond to lat­est set of re­sults?

Finweek English Edition - - Companies & Markets - MARC HASEN­FUSS march@fin­week.co.za

THE ALTX HAS COME IN for a bit of stick lately, with cyn­i­cal sen­ti­ment blan­ket­ing most of the list­ings. No doubt the sit­u­a­tion called for some per­spec­tive. And that’s why the AltX this month re­leased an anal­y­sis of trad­ing up­dates by com­pa­nies listed on the JSE’s al­ter­na­tive bourse. The AltX found that of the 18 trad­ing up­dates is­sued be­tween May and July, only three com­pa­nies ad­vised the mar­ket of not meet­ing their re­spec­tive trad­ing fore­casts. The re­main­ing 15 alerted the mar­ket that their fi­nan­cial re­sults would ex­ceed ex­pec­ta­tions.

JSE busi­ness de­vel­op­ment man­ager Lauren Czepek says: “The in­di­ca­tion is that while share prices have taken a tum­ble, earn­ings have not – which points to the healthy fi­nan­cial per­for­mance of those AltX-listed com­pa­nies.”

Fin­week re­cently de­bated (cover story, 31 July) the blowout in new list­ing val­u­a­tions and the mer­its of newer com­pa­nies at those lev­els. Since late 2007 a good num­ber of newer list­ings on the AltX have seen their share prices fall sharply – some to well be­low the price of their pre-list­ing share place­ment. Czepek reck­ons the cur­rent sit­u­a­tion on the AltX may present an op­por­tu­nity for as­tute in­vestors. That may be true of the AltX in iso­la­tion. But with share prices of many sec­ond lin­ers and blue chips drift­ing into “buy­ing ter­ri­tory” the AltX may not (yet) be the de­fault op­tion for value seek­ing in­vestors.

In­ter­est­ingly, the press release from the AltX about trad­ing state­ments just about co­in­cided with a trad­ing state­ment by Vu­nani, a fi­nan­cial ser­vices com­pany. Vu­nani, which holds stakes in a num­ber of newer list­ings, ad­vised share­hold­ers that for the half-year to end-June 2008 earn­ings and head­line earn­ings would be be­tween 175% and 195% lower than the cor­re­spond­ing pe­riod last year.

That, un­der­stand­ably, would be due to fair value ad­just­ments against the com­pany’s ar­ray of listed in­vest­ments. How­ever, Vu­nani did in­di­cate the af­ter-tax profit gen­er­ated by its core fi­nan­cial ser­vices seg­ment would be 10% and 30% higher for the in­terim pe­riod. As such, Vu­nani – with its core busi­ness looking sound and the chance of its listed in­vest­ments re­cov­er­ing in value – may well be one of the com­pa­nies pre­sent­ing an op­por­tu­nity to in­vestors.

Myr­iad Med­i­cal, OneLogix and Uni­ver­sal Growth In­dus­tries (not AltX-listed) also pro­duced some num­bers that could pique the in­ter­est of pun­ters – al­though you might have ex­pected their share prices to re­spond a tad more vig­or­ously to the num­bers pre­sented in their re­spec­tive fi­nan­cial state­ments.

With sen­ti­ment at best skit­tish for small caps, it seems the mar­ket will, for now, mute its en­thu­si­asm for AltX com­pa­nies pro­duc­ing strong profit growth. But brave buy­ers may be well re­warded over the longer term for go­ing against the flow and ac­cu­mu­lat­ing scrip in se­lected coun­ters.

Still, it’s prob­a­bly worth keep­ing an eye on those trad­ing state­ments. Gut feel is that the next three months may not see quite the same ra­tio of up­beat to down­beat earn­ings ad­vi­sories.

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