Worth keep­ing an eye on this lo­gis­tics David

Financial Mail - Investors Monthly - - Analysis -

ogis­tics spe­cial­ist San­tova has de­liv­ered some im­pres­sive num­bers in the past five years, but it hardly reg­is­ters as a blip on the in­sti­tu­tional in­vestors’ radar screen.

In­vestors Monthly counts just a hand­ful of unit trust funds — most no­tably small-cap ex­pert

LKeith McLachlan’s Al­pha Wealth Prime small- and mid-cap fund — that have loaded up small­ish parcels of San­tova scrip.

The com­pany does find it­self in a dif­fi­cult po­si­tion with in­vestors more likely to fix­ate on larger “mo­bil­ity” coun­ters such as Grindrod and Tren­cor. Those will­ing to cast their glances into left field will prob­a­bly latch on to the re­cov­ery po­ten­tial of Onel­ogix or Value Group be­fore perus­ing the prospects of San­tova.

Re­tail in­vestors will prob­a­bly also be wary of push­ing the buy but­ton when San­tova’s share price still trawls much closer to a new high than its 12-month low.

IM, though, con­tends there is still con­sid­er­able up­side po­ten­tial in San­tova’s shares — which are hardly ex­ces­sively rated on a trail­ing earn­ings mul­ti­ple of around 12 times.

On pa­per, prospects don’t ap­pear en­cour­ag­ing for a com­pany in­creas­ingly ply­ing its trade on the global stage. Lo­gis­tics con­tenders are fac­ing stag­nant global trade vol­umes and there is in­creased com­pe­ti­tion (with new en­trants in the lo­cal mar­ket) that could trig­ger price wars, thereby crimp­ing mar­gins.

Over and above this is the over­ca­pac­ity in the ocean and air­freight sec­tors, which could lead to con­sol­i­da­tion through merg­ers and ac­qui­si­tions.

But San­tova’s in­vest­ment pre­sen­ta­tion in­ti­mates that pre­vail­ing trad­ing con­di­tions may suit the tech-savvy, ser­vice-driven com­pany as clients ad­just to chang­ing sourc­ing lo­ca­tions and points of sale as well as en­ter­tain­ing smaller, more fre­quent pur­chase orders.

Thanks to some smart tech­no­log­i­cal in­no­va­tions in cre­at­ing a one-stop ser­vices of­fer­ing to global clients, the com­pany has carved an en­vi­able niche and a fairly for­mi­da­ble rep­u­ta­tion as a nim­ble provider of tai­lor-made solutions.

San­tova’s year to end Fe­bru­ary re­sults cer­tainly sug­gest that plans to cap­i­talise on op­por­tu­ni­ties in a com­pet­i­tive lo­gis­tics mar­ket can’t be dis­missed as overly am­bi­tious.

The com­pany fat­tened net mar­gins to 7.3% (6.5% pre­vi­ously) — with an in­tense fo­cus on higher-yield­ing air­freight project ship­ments, sup­plier con­sol­i­da­tion and rate re-ne­go­ti­a­tions off­set­ting pres­sure on for­eign op­er­a­tions (where a de­cline in freight rates in the UK eroded mar­gins).

The geo­graphic spread of busi­ness has now also taken on more re­as­sur­ing di­ver­sity. Though 45% of profit be­fore tax was earned in SA, a chunky 23% was gen­er­ated in the UK, 20% in the Nether­lands and 10% in Australia. If the re­cent ac­qui­si­tion of the Trade­way Group is fac­tored in, then lo­cal prof­its re­duce to 37% with the UK el­e­vated markedly to 34% and the

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