Si­mon Says Adapt IT, BSI Steel, Sa­trix

Finweek English Edition - - INSIDE - Si­mon Brown si­monb@fin­ @Si­monPB


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.


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.


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.

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