Torre still expanding in a difficult environment
Torre Industries, a relatively small and unknown l isted company wit h a market capitalisation of R2.4bn, is an i ndust r i a l g r oup t hat pr ov i de s equipment, par t s , f i nancing a nd suppor t ser v ices t o c u s t o mers throughout Africa.
The company replaced the listing of SA French, led from the start by its current CEO, Charles Pettit, in November 2012. SA French st i l l operates as a subsidiary under Torre, and is the leading distributor of tower cranes and l ifting solutions in subequatorial Africa.
From there on it embarked on an acquisitive spree, where it acquired numerous companies as part of its business st r ateg y to diversif y it s operations and eventually operate a defensive business model.
One of its most recent deals was f i nalised i n April 2014, when it acquired Control Instruments Group (now known as Torre Automotive), a company that owns and sells exclusive pr e miu m br a nded a f t e r market automotive parts including Gabriel, the leading ride control system in Africa. Although Torre has been very actively acquiring new companies, it has a continued focus on organic growth, which seems to be working very well for the company, and the shareholders.
The g r oup s a i d i n a t r a d i ng statement on 28 August that it expects headline earnings per share (HEPS) for the year to end June to be between 29c and 30.4c a share, up between 140% and 150% from the previous year. It has been able to create tremendous revenue and profit growth in an increasingly difficult economic environment, with the share price up more than 300% since its listing three years ago.
Another interesting note is that Stellar Capital Partners, a company bi l l i onaire businessman Christo Wiese is involved i n, has a c qui r e d a strategic 26.25% stake i n Torre, with ta l ks underway to acquire a further 8.33%. We wait to hear more details on the strategic nature of the deal, but are sure it will be to the long-term benefit of the shareholders.
The share has been trading sideways for a while now, but we believe that investors are still wary of the state of the economy, especially considering
CEO of Torre Industries t he i ndust r y t he company operates in, and waited to see i f Torre can deliver another i mpressive set of results. We believe that the share price should move up to at least R6 (from R4.75 at the time of writing), which would give it a historical priceto-earnings ratio (P/E) of around 20.
With management i ndicating a minimum HEPS f igure of 42c/share for the 2016 financial year, the share is trading at a one-year forward P/E that is too low for a share showing such continued high growth. Although we are not the biggest fans of the sectors the company operates in, we believe it still has a long way to go before its earnings start to mature. We have been accumulating Torre at current levels, and still recommend it as a buy.