Be wary of small play­ers

Finweek English Edition - - MARKETPLACE - Editorial@fin­

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.

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