One for the value players
PACKAGING COMPANIES have hardly been the most inspiring place to invest your hard-earned cash in over the past few years. However, one attracting some interest beneath the radar is niche player Bowler Metcalf. Recently tipped by fund manager Walter Aylett, of Aylett & Co Fund Managers, at the Finweek Wealth Forum as a stock to watch, the counter has already seen its price rise from 670c a year ago to currently trade at around 850c. Is the good news already priced in? Aylett doesn’t think so, arguing that Bowler is cash generative and trading on a historic earnings multiple of 9 and offering a 3,5% dividend yield. In other words, there’s no reason to say there isn’t more good news to come. Not bad for a stock that listed on the JSE in 1987 at 14c and was trading at 7c in 1990.
Aylett isn’t the only manager bullish about the stock. Hunan Securities recently highlighted Bowler at a recent small and mid-cap stock conference. The firm noted it had raised earnings at a compounded rate of 23,4%/year for the past 25 years and made 21% in compounded revenue growth over the same period.
One of the opportunities highlighted was Quality Beverages, which does the packaging of Jive, Dixie Cola, Aqua Blue and some work for Pick n Pay. Quality Beverages has facilities in Cape Town and Boksburg and the industry requires high levels of capital to enter effectively. With further rollouts planned for Gauteng and Mpumalanga there’s still room for earnings growth and for its past six-month period Quality Beverages was able to raise earnings by 442% on the back of a 40% revenue rise, indicating margin growth.
Interestingly, the company has recently undergone a cautionary – which may relate to the sale of parts of its plastics business, possibly to Mondi.
In short: Bowler Metcalf is liked by value managers, has no debt and a track record of delivering longer term returns. It may be one for those who like to dabble in quality small caps.