CET for the ‘Big one’

‘The Gen­eral’ needs to find some re­ally sharp teeth

Finweek English Edition - - News -

THE LONG-AWAITED “merger” of listed se­cu­rity ser­vices com­pany Com­mand Hold­ings and Alexan­dra Se­cu­rity – owned by empowerment in­vestor Cape Empowerment Trust (CET) – seems to be fi­nally ma­te­rial- ising. Fin­week hears only a few re­main­ing is­sues about the pro­posed merger are out­stand­ing. A source close to the deal in­di­cates the mooted merger is still very much on the cards de­spite the long de­lay in fi­nal­is­ing the trans­ac­tion.

The deal most likely will see CET in­ject­ing its stake in Alexan­dra Se­cu­rity into Com­mand in re­turn for shares in the en­larged list­ing. By Fin­week’s cal­cu­la­tions the newlook Com­mand should gen­er­ate turnover of well over R200m – mak­ing it a slightly more com­pelling niche ser­vice stock.

Much of the in­trigue about the lon­gawaited deal will be cen­tred on what price is placed on Alexan­dra Se­cu­rity, not­ing that Com­mand (with a mar­ket cap­i­tal­i­sa­tion of less than R50m) has been com­pre­hen­sively marked down in re­cent months on the JSE. Af­ter pro­duc­ing earn­ings of 7,7c/share in the year to end-June 2008, Com­mand’s share has traded at a mod­est his­toric earn­ings mul­ti­ple of less then five times.

CET cur­rently owns a 24,4% stake in Com­mand and you sus­pect that stake will shift up to around the 35% mark af­ter the Alexan­dra deal. You might imag­ine Com­mand CEO Shaffie “The Gen­eral” Mowzer hop­ing to have the Alexan­dra deal fi­nalised be­fore the group’s AGM. Share­hold­ers may also use the AGM to re­mind Mowzer about the promised “big deals” that would el­e­vate the group into the top five big­gest se­cu­rity com­pa­nies in SA by next year.

Mowzer told Fin­week re­cently that plans to grow Com­mand’s op­er­a­tional base markedly by ac­qui­si­tion are still on track. No doubt, fi­nal­is­ing the CET/Alexan­dra deal could be the trig­ger for fur­ther sig­nif­i­cant cor­po­rate action.

How­ever, the mar­ket seems numb to those pos­si­bil­i­ties at Com­mand – which is prob­a­bly a func­tion of the pre­vail­ing small cap malaise and the pro­longed ef­forts at se­cur­ing much needed cor­po­rate action. There may even be a case for claim­ing the ebul­lient Mowzer needs to walk the talk.

But Mowzer re­cently ex­pressed sat­is­fac­tion at Com­mand’s progress. “One should re­mem­ber when we took over Com­mand seven years ago this com­pany was a dead dog. Now we’ve man­aged to turn Com­mand into a watch­dog.”

All that re­mains to se­cure much needed mar­ket sup­port is to give the watch­dog some re­ally sharp teeth…

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