Finweek English Edition - - FEEDBACK - Re­sponds: Peter Zipp

I haven’t missed out here. Should I still try and buy it at 68c? Up­front we have the usual dis­claimer when it comes to pick­ing shares – we don’t pro­vide in­vest­ment ad­vice, we can give you some point­ers but each and ev­ery in­vest­ment de­ci­sion needs to be guided by an in­vest­ment pro­fes­sional or your fi­nan­cial ad­viser.

We would point out the fol­low­ing though when it comes to ISA:

At 55c/share, you were ef­fec­tively buy­ing a 7.5% div­i­dend yield (af­ter tax), which beats in­fla­tion and that has to be your start­ing point when it comes to de­ploy­ing your cap­i­tal. At 68c/share, you get nearer 5.5%, which is noth­ing to sneeze at, but is not quite as com­pelling as you need to look at the fun­da­men­tals of the busi­ness. In other words – does it of­fer po­ten­tial for cap­i­tal ap­pre­ci­a­tion?

The next thing to con­sider with ISA is liq­uid­ity. While it was last traded at 68c/share, the next best buyer is at 61c/share (the bid). Buy­ers are at 61c/share, sell­ers at 68c/share – this is more than 10% dif­fer­ence – sim­ply meet­ing the bid here means you sac­ri­fice 10% of your in­vest­ment re­turn. If you like the story, then try and put in a cheeky bid where you get the best price.

Fi­nally with a mar­ket cap­i­tal­i­sa­tion of R130m, it is not on the radar of most South African as­set man­agers. To con­tex­tu­alise, AdaptIT (which has been the dar­ling of the small-cap IT sec­tor for a while now) is a R288m busi­ness and is grow­ing, as op­posed to ISA, which is not. ISA man­age­ment needs to prove that it can grow the busi­ness if they want the share price to re-rate.

Our con­clu­sion is that at un­der 60c/share, it is quite a com­pelling small-cap in­vest­ment, but don’t chase the share sim­ply be­cause the me­dia are talk­ing about it. I found Ven­ture cap­i­tal­ists: Do we still need them? (18 April 2013 is­sue) to be a good ar­ti­cle. I be­lieve that VCs do still have a role to play, it’s just that they seem to have lost touch with their orig­i­nal pur­pose, and also have not adapted fast enough to the chang­ing en­vi­ron­ment. For a de­tailed per­spec­tive of where VC went wrong and how it might be fixed, I highly rec­om­mend http://ven­ture­com­pany.com for fur­ther read­ing.

We still need ven­ture cap­i­tal, but it needs to re-in­vent it­self.

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