A pret­tier shade

Finweek English Edition - - COMPANIES & MARKETS - MARC ASH­TON

I’VE TAKEN quite a lot of flak over the past 12 months for my in­sis­tence that pack­ag­ing firm Beige Hold­ings is in fact a de­cent enough ad­di­tion to a small cap port­fo­lio. The prob­lem many have – rightly so – is there are so many shares in is­sue (a shade over 1,5bn) it’s dif­fi­cult to ever re­ally see an in­vest­ment re­turn un­less there’s a mas­sive turn­around in its un­der­ly­ing busi­ness.

Beige’s most re­cent full-year re­sults would in­di­cate things may fi­nally be turn­ing the cor­ner and for the first time since the turn­around be­gan in the mid-Nineties share­hold­ers even got re­warded with 0,15c/share div­i­dend for their pa­tience. You can buy Beige at 6c, with its net as­set value be­ing around 14c/share and tan­gi­ble net as­set value com­ing in at just more than 8,6c/share. So that would sug­gest if you can pick it up for 6c you might be scor­ing a bar­gain.

With al­most R600m in rev­enue, Beige is be­com­ing a big busi­ness and as it grad­u­ally ti­dies up its bal­ance sheet in­vestors might start see­ing some real kick­ers com­ing through on its cash flow line. Its debt and bor­row­ing lev­els have be­gun to drop and at op­er­at­ing level the group is now cash flow pos­i­tive.

Beige has also man­aged to re­struc­ture some of its prop­erty as­sets and use some of the cash gen­er­ated to tackle some of its debt. That should im­prove cash flow by at least R9,5m in its new fi­nan­cial year.

Baby steps per­haps, but with the threat of ris­ing in­ter­est rates in the com­ing new year hang­ing over com­pa­nies with over­bur­dened bal­ance sheets, this might just be one more step in the right direc­tion. We wouldn’t bet granny’s pen­sion on Beige but if you’re in­ter­ested in a small cap where there’s some po­ten­tial to dou­ble your money then this might be worth look­ing at a bit more closely.

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