Virgins help recycling
THIS IS THE BABY of the containers/ packaging sector in terms of market capitalisation, though Transpaco is an old and established business. But it’s never really caught the imagination of investors, at least not until recently. Somebody seems to be buying up the share. In a week (up to Wednesday last week) when the SA market declined sharply in tandem with world markets, Transpaco’s share price gained nearly 5%.
But more likely investors are taking a closer look at Transpaco since it, in contrast to others in the industry, released a solid set of full-year financial results. Most noteworthy is that the numbers were tweaked in the second half of the financial year and seem likely to continue improving. As management says: “The significant increase in headline earnings per share in the second half of the year… is encouraging for the year ahead.”
There are a few reasons for its muchimproved performance. In the previous financial year Transpaco started a number of expansion programmes, adding plant and increasing capacity in selected areas. That seems to be starting to pay off. The programme continues, with investment in plant of more than R100m planned over the next two years.
That should get Transpaco on to the investment radar screen. An earnings multiple of 4,9 times, generous dividend yield of 6,2% and a share price currently less than net asset value are flashing green.
But after reading that “high virgin raw material prices are benefiting the recycling division” this ever so slightly devious mind began to wonder. Curiosity increased at the first two headings in the segmental analysis – “Rigids” and “Recycling flexibles”. What, exactly, does this company do? Not sure, but whatever it is, it’s working.