Po­ten­tially in­ter­est­ing

Finweek English Edition - - COMPANIES & MARKETS - MARC ASH­TON

THERE AREN’T too many listed mar­ketlead­ing tech­nol­ogy busi­nesses in South Africa for lo­cal in­vestors to con­sider for their port­fo­lios and with a wave of op­ti­mism sweep­ing the sec­tor glob­ally it’s easy to feel left out. The ap­peal of Blue La­bel Tele­coms (BLU) is with Microsoft hold­ing just un­der 12% of the busi­ness the logic fol­lows if it’s good enough for a world­wide leader then it prob­a­bly does have some growth prospects. An in­ter­na­tional IT busi­ness avail­able at a South African price.

How­ever, for would-be in­vestors the share has al­ways looked ex­pen­sive. Listed at around 800c/share, it was prob­a­bly quite at­trac­tively priced when it hit sub-400c in Oc­to­ber 2008. Since then it’s traded at be­tween 500c and 700c/share but has been sold down over the past few weeks, in line with the broader mar­ket. BLU has also been burnt by its ties to Multi-Links in Nige­ria, and the com­pany an­nounced it was ex­it­ing the re­gion to fo­cus on other coun­tries, specif­i­cally Mex­ico and In­dia – a sign that man­age­ment knows when to cut its losses.

That leaves an in­vestor buy­ing a busi­ness with a 10 times earn­ings mul­ti­ple, a 2,4% div­i­dend yield and a shade un­der R2bn in cash in the bank. Is it worth a punt at those lev­els? Pro­fes­sional in­vestors don’t seem to think so and were net sell­ers of the share in first quar­ter 2011. How­ever, the price was sup­ported by the Sa­trix Divi reweight­ing, with BLU cur­rently mak­ing up 4% of that div­i­dend-yield­ing port­fo­lio. That’s why we ten­ta­tively con­sider the share a “buy” at be­neath 500c.

Good cash flows and div­i­dends are al­ways an im­por­tant con­sid­er­a­tion in a tough mar­ket. BLU scores on both those fronts.

Finweek bat­tled to find a com­pany we could di­rectly com­pare the of­fer­ing of BLU with and even­tu­ally set­tled on Visa, as it shares some sim­i­lar char­ac­ter­is­tics. If you were a cur­rent buyer of Visa shares you’d be pay­ing 15 times earn­ings and get­ting less than 1%. That com­pared against nine times earn­ings and 2,5% yield means you have to con­sider BLU for your port­fo­lio.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.