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?

Financial Mail - Investors Monthly - - Contents - Marc Hasen­fuss

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.

Pic­ture: 123RF — DMYTRO MYRGOROD

Pic­ture: 123RF — NONWARIT PRUETISIRIROT

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