Vir­gins help re­cy­cling

Finweek English Edition - - News -

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.

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