Heavy metal har­mony

Finweek English Edition - - Companies & Markets -

WHILE THE JSE is a com­mod­ity heavy mar­ket, it seems the con­cept of “met­als trad­ing spe­cial­ist” doesn’t carry the ex­cite­ment fac­tor of a long shot ex­plo­ration counter or a hit-and-miss ju­nior miner. While the thrill of buy­ing into an­other Ocean Di­a­mond Min­ing or an­other Pet­min will al­ways drive spec­u­la­tors to­wards the ex­citable fringes of the min­ing sec­tor, there’s much to be said for the el­e­ments of re­li­a­bil­ity that are rather prom­i­nent in the lat­est re­sults from met­als trader Met­mar.

The down­turn in com­mod­ity prices ob­vi­ously smacked Met­mar’s top line, which was down by more than 50% to R1,7bn for the year to end-Fe­bru­ary 2010. You might imag­ine such a rev­enue crunch to rat­tle through to bot­tom line and send rip­ples through the cash flow state­ment and bal­ance sheet. Yes and no. Op­er­at­ing prof­its were down by more than 60% to R67m, but its bot­tom line was bol­stered by a R153m one-off profit on the sale of PGR 17 In­vest­ments and Mo­gale Al­loys.

More im­por­tantly, cash flows from op­er­a­tions were a re­as­sur­ing R72m, leav­ing Met­mar with cash of R98m in the bank (equiv­a­lent to 45c/share). That ex­plains (and jus­ti­fies) a dis­tri­bu­tion from share pre­mium of 25c – which puts Met­mar on a yield of well above 5%.

At the lat­est earn­ings of 81c/share, Met­mar is trad­ing on a his­tor­i­cal earn­ings mul­ti­ple of around 5,3 times. But that in­cludes the one-off profit. If only op­er­a­tional prof­its are tal­lied then earn­ings comes in at around 33c/share. But earn­ings should be bet­ter in fi­nan­cial 2011, with man­age­ment al­ready re­port­ing an im­prove­ment in busi­ness in the early months of the new fi­nan­cial year.

We sus­pect the earn­ings level of 90c/ share recorded in its 2009 fi­nan­cial year is a dif­fi­cult tar­get, judg­ing by the greasy slope

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