Simon Says Adapt IT, BSI Steel, Satrix
A SOLID GROWTH STRATEGY?
Solid results from Adapt IT show organic growth. In addition, acquisitions are on track and working so far, albeit off a very small base. This is very much the EOH model and, as CEO Sbu Shabalala admits, the acquisitive growth strategy is really more about people management than anything else.
On the business side, the recent acquisition of Aquilon shows just how the model works. Aquilon gives Adapt IT a new area of operation in the African oil and gas sector, additionally giving it a presence in Cape Town as well as expanded SAP skills. The latter two are then integrated into the wider company, benefitting all the different components of the business. But as pointed out, this is about peo- ple management, which is very hard to measure, especially in the short term, and it gets harder as a company grows in size.
PLAYING ON DANGEROUS GROUND
BSI Steel had a very tough time of it over the last few years and its recent Sens is all about a new way forward with commodity trading. This is a low margin and, to my mind, a high-risk business model. First, you need to source the commodities and then find buyers, but that’s the easy part of the equation. The hard part is making sure you don’t take on excessive price movement risk; the last thing you want to do is f ind a commodity that you are holding collapsing in price, as this will wipe out margins faster than you can imagine. The latest results to the six months ending September show a tangible net asset value (TNAV) of 83 cents while the stock trades below 70 cents.
But we have warned often enough that even TNAV can be dangerous and in the case of BSI Steel, it is mostly made up of inventories and trade and receivables. In other words, stock that the company still has to sell and monies owed to it that still have to be paid.
OF NO CONCERN
We’ve been seeing the Satrix exchangetraded f unds ( ETFs) issuing Sens announcements about ‘partial delistings’ and my inbox has been inundated with emails from people asking what this means and whether they should worry. In the recent examples it is merely redemptions of baskets. In the case of Satrix, a basket is 1m ETFs and a holder has requested the underlying shares for the ETF (which can be done in multiples of 1m ETF units, so not for us small investors). It’s nothing to fret about.