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Get ready for the onslaught... High interest will not protect you from ... Plan for your children's future with tru... UNIT TRUSTS:ABSA Balanced Fun... Wall Street bull ascends the throne once... 'South Africa still a good place to inve... Take delivery of service from the comfor... Is the advice you're getting good for yo... Brokers place their bets on the rollerco... |
Brokers place their bets on the rollercoaster ride of the stockmarketWE ASKED some analysts and fund managers to name the penny stocks they find tempting.
VESTACOR Brokers: S P Reid & MacKeurtan's Clarice Braun; Investec Securities' Jonathon Rogoff
Vestacor, once the holding company for beleaguered Mathieson & Ashley, is now an investment capital fund which buys into quality companies with strong growth potential. Its aim is to nurture these companies to a stage where they can be listed separately on the JSE. Its chairman is the highly regarded Gerald Rubenstein, who brought companies like Profurn and Softline to the market. Vestacor's first acquisition is a 70% stake in retailer Sport 'n Leisure and others will no doubt follow.
SHARRIG INDUSTRIAL HOLDINGS Broker: Mathison & Hollidge's Oliver Hoffman
After minimal growth in 1996, Sharind's earnings are forecast to rise by around 20% when it reports results in October for the nine months ending September. Its interests in precision engineering, mining equipment fabrication, materials handling, and steel trading and processing are performing adequately despite difficult market conditions. Should exports of its railway retarder (which controls railway wagon speeds in marshalling yards) accelerate, hard currency earnings will flow straight to the bottom line. This is because most of the development costs have already been absorbed. Sharind should also benefit from a rerating when perceptions of the engineering and construction industries turn more bullish.
CULLINAN HOTEL & LEISURE Brokers: Mathison & Hollidge's Oliver Hoffman; Investec Securities' Jonathon Rogoff
Cultel operates two hotels in Sandton and a travel agency. Its expansion plans include hotels at the East Rand Mall and V&A waterfront, both due to be completed next year. The current share price already discounts views that it's a risky venture in an industry characterised by overtrading and high fixed costs. Interest earnings on the R70-million in cash it recently raised through a clawback - or reverse rights offer - will compensate for a slow trading year. Based on analysts' forecasts of its earnings, Cultel is cheaply priced when compared to, say, City Lodge. Yet, it has stronger growth prospects as it is coming off a low base and is well capitalised to triple room numbers by 1999.
INMINS Broker: BP Bernstein's Neville Stevens-Burt
After several troubled years, Inmins recently announced a 90% rise in interim earnings a share. Its order books look good and its prospects for the full year appear rosy. The balance sheet has strengthened and it is expected to conclude an arrangement with a consortium of banks to improve its financial structure. Inmins supplies capital and consumer goods to mining, petrochemicals and industrial companies, and is currently involved in negotiations which could further boost earnings.
WINBEL Broker: BP Bernstein's Neville Stevens-Burt
Winbel is the investment holding company of Winhold, which in turn controls Inmins and Gundle. "This group has turned the corner but no one has seen the skidmarks," says Stevens-Burt. In addition to better prospects at Inmins, Gundle - a manufacturer of products formerly known as Plastall - is expected to show rapid earnings growth. Gundle is building a new factory in Gauteng which will produce value added goods for several industrial sectors. It has also been capturing market share. Its recent R25-million rights issue has reduced its gearing and will allow it to focus on expansion and acquisitions.
USKO Brokers: Investec's Jonathon Rogoff; SP Reid & MacKeurtan's Clarice Braun; Irish & Menell Rosenberg's Greg Amoils
Listed in the electronics sector, Usko makes electrical wire and cable. Once a stagnant company, it now has new shareholders and new management, including MTN's former chief executive John Beck. One of the most tradable shares on the JSE, Usko's balance sheet is strong and it has plans to expand into high growth, hi-tech areas. Acquisitions and a tie-up with a black empowerment partner have been hinted at.
JASCO ELECTRONIC HOLDINGS Broker: Mathison & Hollidge's Oliver Hoffman
Despite a sound profit history, Jasco trades on a comparatively low price-earnings ratio (an indication of how the market rates it) compared with other companies in the electronics sector. This may be due to its foray into the nascent vehicle-tracking business through a newly formed subsidiary, Datatrak, which is not expected to break even this year. Its other divisions, primarily involved in medical supplies and electronic components, have a strong profit history and are budgeting to grow earnings by 35% in the 1998 financial year. However, losses from Datatrak should reduce total earnings.
S&J LAND HOLDINGS Broker: Mathison & Hollidge's Oliver Hoffman
Housed in the development capital market sector, S&J holds about 490 hectares of freehold property situated at the juncture of main arterial routes in the Johannesburg/Germiston area. Most of this land is earmarked for industrial and commercial development, or for sale when sand dumps and slimes dams from previous mining activity are removed. S&J is an interesting asset play: its land was independently valued at R137-million in August 1995 - which amounts to a value of 521c a share. It was trading at around 90c earlier this week. The risk of debt is minimised because property sales should provide the funds needed for development plans. But be warned - this share needs considerable patience.
MARLIN Broker: Investec's Jonathon Rogoff
Marlin could show a healthy turnaround after having its results knocked by the takeover of troubled Kudu Granite. Its order books are full and it is viewed as a solid company which benefits from strong overseas demand. The share is currently trading at a considerable discount to the price set by a previous rights offer. Once it reaches this price, its upward movement could accelerate.
FREE STATE DEVELOPMENT & INVESTMENT CORP Broker: Mathison & Hollidge's Oliver Hoffman After the delisting of Lydex and Randex, Freddev remains the only listed exploration company with exposure weighted towards gold. It offers an interesting asset play. Its assets include a small investment portfolio (Knights, S&J Lands, Ergo and Benco), cash of R8.1-million and in July next year it will receive R26.7-million when its option holders exercise their rights. Together, these assets are worth R34.9-million or 157c a share. This means the market places a value of less than R26-million on its mineral rights. In addition to rights in platinum and coal, it has gold rights concentrated around Western Areas, the southern area around Vaal Reefs, Southvaal and Eastvaal, and the region between Beatrix, Freegold and Harmony. These gold rights are estimated to contain more than 20-million ounces of gold. At its current share price, the market is valuing these at R1.10 per ounce of gold in the ground - which is quite cheap. Hoffman believes Freddev could become a takeover target when the gold price recovers. Top of page
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