A self-proclaimed opportunity…
But how will market respond to latest set of results?
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.