Finweek English Edition - - Companies & Markets -

ANY­ONE ON THE LOOK­OUT for a small cap, cheap ben­e­fi­ciary of South Africa’s in­fra­struc­ture boom shouldn’t ig­nore South Ocean Hold­ings. Founded 17 years ago, it listed last year and man­u­fac­tures power trans­mis­sion ca­bles for do­mes­tic and in­dus­trial use. It also bought a lead­ing lighting dis­trib­u­tor – Ra­di­ant – last year, which sells to the man-in-the-street and de­vel­op­ers.

Al­though the cur­rent slow­down in the build­ing re­fur­bish­ment mar­ket is hav­ing an ef­fect, South Ocean re­mains well po­si­tioned to ben­e­fit from the on­go­ing in­fra­struc­ture spend by Gov­ern­ment and the pri­vate sec­tor. It re­cently re­ported rev­enues of R574,9m (up 79,5%) and head­line earn­ings per share of 46,2c, an in­crease of 23,5%, for the half-year to June – de­spite pro­duc­tion is­sues and cop­per sup­ply short­ages.

At a price of 371c, South Ocean is on a for­ward earn­ings mul­ti­ple (on an­nu­alised earn­ings) of just four times, has a his­toric div­i­dend yield of seven times and paid out 7c to share­hold­ers at the half-year, with the aim of pay­ing a larger div­i­dend at year-end. Op­er­at­ing mar­gins of 20,1% are en­tic­ing.

Also en­tic­ing is the ob­vi­ous down-to-busi­ness na­ture of its peo­ple, as ev­i­denced by the fact that when work­ers went on strike, every­one – from ad­min staff to direc­tors – got stuck in on Sun­days to limit pro­duc­tion down­time.

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