Shouldn’t be ignored
AS IT STANDS right now, investing in struggling small-caps is a relatively high-risk strategy. Even if the underlying businesses are sound – and there are many which aren’t – the limited appetite for these shares means that many of them turn into “value traps”. Having said that, over the last few weeks, engineering group Ansys has been popping up in conversation, and it might be worth a closer look.
Keith McLachlan from Thebe Stockbroking points out that the net asset value (NAV) is 24.5c and the tangible NAV (TNAV) is 6c/share. If you can pick the share up at between 16c and 18c/share, you might do all right for yourself. Ansys is heavily exposed to the SA rail and defence industries, which are both expected to see significant investment. Both divisions were profitable last year and if there is some kind of rebound in the mining sector, this will flow through to the bottom line quite rapidly. The one concern will be the cashflow statement which isn’t inspiring – you don’t want to be seeing a rights issue in the near future.