SUN IN­TER­NA­TIONAL

Finweek English Edition - - INVESTMENT -

SELL Ass e t man­age­ment f irm RE:CM says that it has taken some of its prof­its from the ho­tel group and re­duced its ex­po­sure. The group also re­duced its hold­ing in for­eign re­tailer Car­refour. Port­fo­lio man­ager Daniel Malan told clients: “As with Car­refour, it is still a large in­vest­ment in the Fund, but share price moves in the early months of 2013 re­duced the mar­gin of safety be­tween fair value and the stock price to lev­els where a re­duced ex­po­sure was called for.” Keith McLach­lan from Thebe Stock­broking re­cently ran an in­ter­est­ing ex­er­cise in an ef­fort to find small-cap­i­tal­i­sa­tion shares that may be un­der­val­ued. His cri­te­ria were as fol­lows:

The price-to-book (P/B) ra­tio must be less than 1.0 times, i.e. The stock is trad­ing be­low book.

The price-to-earn­ings (P/E) mul­ti­ple must be greater than 0.0, in­di­cat­ing that the com­pany is prof­itable.

The div­i­dend yield (DY) must be greater than 0%.

The 3-year aver­age re­turn on eq­uity (ROE) must be greater than 10%, which in­di­cates that the com­pany is rea­son­ably prof­itable dur­ing that pe­riod.

The 3-year aver­age debt to eq­uity must be less than 0.50. The cal­cu­la­tion helps fil­ter out com­pa­nies where the ROE is in­flated due to ex­ces­sive debt fund­ing in the com­pany’s cap­i­tal struc­ture.

Us­ing this cal­cu­la­tion, the shares that made this list were Richemont, Cafca, Work­force Hold­ings, Delta EMD, Morvest, Mustek, Amecor, Randgold & Ex­plo­ration, Sabvest, Brim­stone In­vest­ment Cor­po­ra­tion and Span­jaard.

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