One for the value play­ers

Finweek English Edition - - COMPANIES&MARKETS PORTFOLIOPUNTS - MARC ASH­TON

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.

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