Small caps for scav­engers

Quick picks

Finweek English Edition - - Communication & Technology - SHAUN HAR­RIS

EVEN THOUGH IT’S dif­fi­cult try­ing to write some­thing use­ful about our (largely) di­rec­tion­less mar­ket at the mo­ment, I can’t re­sist the temp­ta­tion to look at some quick picks. Once again, I’m in­debted to the an­a­lysts and port­fo­lio man­agers at Imara SP Reid. Their views are con­cise, tend to be a bit dif­fer­ent and I just like the way (of­ten tongue in cheek) they say things.

I’ve only se­lected the stocks that Imara call “spec­u­la­tive” buys. You know all the warn­ings: spec buys are higher risk, etc. What’s at­trac­tive about the shares listed be­low is that prob­a­bly all of them can be re­garded as small caps. So if read­ers are in­ter­ested in buy­ing any of them, it won’t break the bank. But please re­mem­ber, spec buys are higher risk. the com­pany un­der se­vere cash flow pres­sure from its ma­jor cus­tomer ex­tend­ing pay­ment terms. “In ad­di­tion, con­sumer neg­a­tiv­ity and size of the com­pany debt will have in­flicted slow poi­son on op­er­at­ing health.” But it adds the rights is­sue fully un­der­writ­ten by HCI “will prob­a­bly do the trick”. Imara also likes its toy busi­ness. one-month’s earn­ings from lat­est ac­qui­si­tion Natal Whole­sale Jew­ellers (NWJ). It’s an odd ac­qui­si­tion for what’s es­sen­tially a branded food busi­ness but I’ve heard man­age­ment ar­gue con­vinc­ingly about NWJ’s mer­its – and Taste man­aged to knock down the ac­qui­si­tion price. NWJ tends to be a cash sales busi­ness, good in the cur­rent in­ter­est rate cli­mate. And it’s not top end of the mar­ket, which might also be good. Peo­ple can’t re­ally stop buy­ing jew­ellery for spe­cial oc­ca­sions – but they can buy down. A fur­ther ad­van­tage Imara sees in NWJ is that it’s ver­ti­cally in­te­grated, with both re­tail and man­u­fac­tur­ing ac­tiv­i­ties.

Food brands are strong and also at the more af­ford­able end of the mar­ket. Peo­ple don’t stop eat­ing take-away food in tough times – in fact, they prob­a­bly eat more. sav­ings and ef­fi­ciency rather than grow­ing rev­enue. There’s also a new ac­qui­si­tion here – elec­tri­cal busi­ness MTec. The share is favoured be­cause the tele­coms busi­ness in Jasco con­tin­ues its ex­pan­sion of net­works in Africa and should ben­e­fit from on­go­ing lib­er­al­i­sa­tion of tele­coms in SA. “Ex­pect on­go­ing Gov­ern­ment spend in tele­coms and elec­tric­ity in­fra­struc­ture.” se­cu­rity for mo­tor ve­hi­cles but can also track and mon­i­tor just about ev­ery­thing a ve­hi­cle and its driver does. Imara says ad­van­tage. Large tenders have been won, re­search and de­vel­op­ment is on­go­ing and growth is ex­pected from SA’s Gov­ern­ment de­part­ments.

Imara says some pro­duc­tion has been moved over­seas, which may re­duce pro be grow­ing ex­ports. lit­tle AltX-listed com­pany in full: “ This stock looks set to beat ex­pec­ta­tions – and that af­ter the price has fallen a very long way. It’s all over­done and value scav­engers can look to spec buy.” ¤

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