Focus on dividends, not price
Small caps are having a tough time and, in many cases, unfairly so – as evidenced by Wescoal’s results for the six months to 30 September. Revenue was up 28% and HEPS was up by 16%, with massive free cash flow (R291m this half that it used to pay off debt, issue a dividend and buy back shares). It now sits on a priceto-earnings ratio (P/E) and dividend yield of both around four. A quality junior coal miner, this stock is cheap, but nobody is interested. The market just doesn’t care for small caps, regardless of the quality or valuations and it will be some time before it starts to take notice. So if you hold, enjoy the dividends. But don’t expect any serious price moves.