Financial Mail - Investors Monthly
BUY, HOLD, SELL
It’s quite rare for companies that delist from the JSE to come trundling back many years later. So which prodigal counter will make a rewarding return?
HomeChoice International Share price: R38.10 JSE code: HIL BUY THE ATTRIBUTES OF THIS
specialist retailer are unlikely to resonate too well with institutional shareholders. HomeChoice was delisted by the current majority shareholder in a most unsporting fashion in 2002, and the institutional memories are long and bitter.
The fact that HomeChoice’s tenure as an unlisted company was hugely rewarding for the shareholders who were able to stay onboard has only increased the animosity.
That said, the new-look HomeChoice International has returned to the JSE with a more compelling business model in the form of a broader retail offering and a slick financial services pitch to the company’s best-paying clients. Its shift from traditional catalogue sales to multichannel retail, with a growing digital sales platform and a showroom presence, is also intriguing. It seems that the costs of the showroom rollout might not require HomeChoice to seek fresh capital from the market.
HomeChoice had previously signalled a willingness to raise fresh capital by issuing shares to new institutional shareholders. Presumably there were still misgivings, precluding a capital raising at optimum pricing. The current trading range for HomeChoice looks fairly attractive. The share trades on a modest seven times multiple and offers a rich dividend yield of over 5%. One for the bottom drawer.
Hosken Passenger Logistics & Rail Share price: 514c JSE code: HPR HOLD ON PAPER, HOSKEN PAX*
would be a candidate for a SELL tag. Higher fuel prices, bigger labour costs and the constant threat of destructive protest action in Cape Town would understandably have punters declining a ticket to ride.
But Hosken Pax — which really revolves around the 157-year-old Golden Arrow Bus Services — has an incredible record in profit generation since it was acquired by empowerment company Hosken Consolidated Investments in 2004.
Golden Arrow benefits hugely from government incentives that ensure employees in various Cape Town industries can have access to reliable and affordable transport to work and back.
Having an incentive cushion might normally induce a sense of complacency in a company. Not so with Golden Arrow. Highly regarded management have ensured that the bus routes are reliable (compared the Cape Town train services). Hosken Pax has also invested heavily in efficiencies — upgrading the bus fleet and introducing electronic ticketing systems.
Ordinary punters willing to endure a bump or two might consider flagging down Hosken Pax if the price weakens further — hitching their hopes to a modest forward earnings multiple and the potential for a generous dividend payout. *The writer holds shares in Hosken Pax
Mettle Investments Share price: 98c JSE code: MLE SELL THE FIRST SOJOURN BY
financial services company Mettle on the JSE was an underwhelming affair.
The company (formerly Boland Financial Services) timed its market entry to coincide with investors’ growing discontent with acquisitive technology and financial companies that came to the JSE in the late 1990s listings boom.
Seventeen years after skulking off the JSE, a new-look Mettle was unbundled by the Christo Wiese-controlled property conglomerate Tradehold and listed.
Investors have not chased the stock. Even small-cap punters might find Mettle — with a market capitalisation of less than R250m — a little undersized. That said, Mettle boss Friedrich Esterhuyse is a smart cookie with a lot to prove in bulking up Mettle’s portfolio of specialist financial services, UK-based asset-backed security lending and solar power solutions.
At the moment, Reward — the UK-based lender — earns most of Mettle’s keep. With Brexit hanging in the balance, there will probably be some uncertainty around risks and opportunities in Reward.
Mettle’s share prices are unlikely to gain traction quickly. It seems unfair to tag it a SELL this early. Let’s just say there might be a better time to buy the shares next year.