Torre prepares for some heavy lifting

IT IS not often that companies take to the road to raise cash through the issue of new shares and return with nearly twice what they were hoping for.

There was something of a scramble to acquire seemingly dirt-cheap private placement shares in Torre Industrial Holdings recently. And while its current share price reflects fair value, the excitement lies in the medium to long term.

Torre, still listed on the JSE’s AltX, the parallel board for small and medium-sized highgrowth companies and hoping to raise R175-million to continue with its rapid expansion phase, raised R300-million.

Those waving cash in the company’s face were no mugs: Investec, Momentum, Stanlib and Sabvest all took a position at R2.20 a share.

Torre was set up in November 2012 to hold wholly owned subsidiaries SA French and Forktech but has since gone on an acquisition spree.

It is aiming to turn itself into an industrial holding company in the mould of Invicta, with interests in the capital equipment, industrial consumables and asset finance space.

The group now boasts a market cap of about R500-million, with a price-to-earnings ratio of 62.5. That number is bound to make investors a little wary, but the company is just starting to deliver on its potential.

Investor faith in Torre’s management seems to be strong, but CEO Charles Pettit said he wasn’t feeling any pressure.

“We were comfortable we’d raise the money. We talk to these guys all the time, and we knew we’d have support, but it was still gratifying to get it,” said Pettit.

“There’s a lot of value in the price on a forward-earnings basis, given what we know about the businesses we’ve acquired. We don’t have concerns that we won’t deliver.”

Torre has made a bid for outright ownership of Control Instruments, a listed automotive parts supplier.

Pettit said there was still one announcement to come.

“We’re under cautionary in relation to an acquisition in the materials handling industry, so we can bulk up our forklift business, which will be announced imminently.

“But there won’t be more acquisitions between now and year-end. The focus is now on organic growth.”

This should soothe those who were worrying the company may have overstretched itself.

Interim results for the six months to December, to be released on Wednesday, will include TGS (Tractor and Grader Supply), SA French and Forktech.

According to Pettit, TGS Torre has a comprehensive footprint across southern Africa and a new acquisition called Power Parts in Namibia.

“These are quite small acquisitions, and some are

It’ll give us more comfort when it isn’t just buying earnings

start-up businesses where we’ve gone into a joint venture with a local partner or started something from scratch. We haven’t put a lot of capital at risk in building the network, but we’ve been knitting it together painstakingly so we have the geographic coverage.”

In central and western Africa, Torre acquired Kanu Equipment, which is the Liebherr and Bell Equipment dealer in the Republic of Congo.

“That’s a booming market with a lot of activity, and South African mining and construc- tion firms are involved — Exxaro is investing $5-billion in an iron-ore mine there. Through Kanu, we’re in the process of obtaining the Bell and Liebherr dealerships for Ghana, Liberia, Sierra Leone, Ivory Coast, as well as Cameroon and Gabon.”

Damon Buss, an equity analyst at Stanlib, said the management team continued to meet and exceed targets set when the business listed.

“Torre Heavy Lifting is doing well with the majority of sales into Africa, avoiding a soft market in South Africa. The whole leasing unit is fully leased out as governments spend on infrastructure.

“It’ll give us more comfort when the company isn’t just buying earnings, but we were comfortable when we bought into Torre, and we’re comfortable now,” said Buss.

Investec Asset Management portfolio manager Richard Middleton said it was never a case of getting in at R2.20 a share and out at R3, so the traditionally low levels of liquidity on the AltX don’t bother him.

“When we started buying into Torre, it was around management capability. Pettit is a corporate financier. In putting together the correct deals he’s very strong.”