Steal a march on the tribe

Finweek English Edition - - Com­pa­nies & Mar­kets - SIKONATHI MANTSHANTSHA

TECH­NOL­OGY GROUP Zap­tronix’s much­promised turn­around hasn’t yet ma­te­ri­alised and the share has suf­fered dearly in the cur­rent bear mar­ket. But the eq­ui­ties mar­ket can’t ex­actly be blamed for its lack­lus­tre per­for­mance. AltX-listed Zap­tronix’s lat­est in­terim re­sults to Fe­bru­ary 2008 didn’t of­fer much rea­son for the mar­ket to be gen­er­ous in its val­u­a­tion.

Zap­tronix spe­cialises in risk man­age­ment ser­vices in the en­ergy sec­tor and also pro­vides re­mote meter-read­ing sys­tems and pre­dic­tion plan­ning soft­ware to fleet man­age­ment com­pa­nies. Im­pe­rial Hold­ings is one of its ma­jor clients.

Dur­ing Novem­ber 2007 Zap­tronix an­nounced a black em­pow­er­ment deal with the re­spected Royal Bafo­keng Cap­i­tal (RBC), which bought a 30% stake at more than three times the then mar­ket price of 5c/share (af­ter a year-long due dili­gence). Zap­tronix then promised to lever­age the RBC’s strength in fi­nan­cial struc­tur­ing and cap­i­tal mar­kets to ac­quire com­pa­nies that would con­trib­ute to its busi­ness model. Its aim is to boost its ex­ist­ing busi­ness chan­nels – Zap­tronix Me­ter­ing, RMS Tech­nol­ogy, ENEO En­ergy So­lu­tions and DUO Track­ing So­lu­tions – “to gain ac­cess to mar­kets and cap­i­tal with sig­nif­i­cant po­ten­tial ben­e­fits”.

Over the next few months Zap­tronix will be re­port­ing its full year to Au­gust. And now that it’s com­pleted its re­struc­tur­ing process it should im­prove on its HEPS of Au­gust last year. There’s been no cor­po­rate ac­tion as yet but the RBC can’t be happy just sit­ting on the shares, for which it paid dearly. It has an op­tion to buy a fur­ther 30% (new re­cap­i­tal­i­sa­tion is­sue) at 16c/share within two years, be­ing the price it paid for its cur­rent stake in Novem­ber.

Now that its re­struc­tur­ing is over we reckon the com­pany can’t af­ford to wait an­other year to raise funds and em­bark on its promised ac­qui­si­tion spree. Still at a de­mand­ing 31,25 times earn­ings mul­ti­ple, in­vestors can steal a march on the RBC and buy at the cur­rent 10c/share level. It of­fers even brighter value and prospects.

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