CABLES AND LIGHTS – CHEAP AT THE PRICE
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.