Be wary of small players
Value released a strong trading update, with HEPS expected to be between 55% and 75% higher. This is on the back of tough trading conditions in the sector, and achieved thanks to restructuring within the group. On a share price of 320c and earnings in the mid-range at around 60c, this gives a P/E of 5.3 and a historic dividend yield of 5.6%. On the surface, this represents massive value, but since it is a very small stock with a market cap of only some R600m, liquidity could be a concern as markets grapple with South Africa’s junk status. Even with great results coming in early May, local GDP growth of around 1% at best for 2017 means Value will have a rough time going forward. For now, the market is taking the sceptical approach.