Listed Securities Watchlist

CLICKS GROUP LTD (CLS:JSE)

Business Profile

Clicks Group Ltd. operates as an investment holding company, which engages in the retail trade of healthcare products. The company operates through the Retail and Distribution segments. The Retail segment comprises Clicks, health, beauty, and homeware retailer; Claire’s, retailer of jewelry and accessories; GNC, retailer of health and wellness products; and The Body Shop, which offers toiletries, cosmetics, gifting and grooming, with stores in the Republic of South Africa, Namibia, Swaziland, Botswana, and Lesotho. The Distribution segment involves in UPD, a pharmaceutical wholesaler that operates within the Republic of South Africa and Botswana. The company was founded by Jack Goldin in August 1968 and is headquartered in Cape Town, South Africa.

Technical

  • Currently trading at 15% discount to all-time highs.
  • Given past volatility, this share is reaching potential buy levels around the R230-R220 area.
  • Strong natural up trend that coincides with company fundamentals.
  • Earnings have caught up to price levels and the company is trading just below its average P/E ratio.

Fundamental

  • Sound Income Statement, with Revenue and Profit margins both growing over the past 5 years.
  • Debt to Asset ratio of 66% means that this company is well positioned for harsh economic conditions.
  • Assets have been meaningly increasing over the past 5 years.
  • Clicks Group has one of the best distribution channels within the sector and this is evident in their pharmaceutical drug distribution business which has grown nearly 20% over the last year, which increases their market share.

Summary

Despite the tight economic conditions that have been brought about by COVID-19, the group is planning on opening 14 new stores through 2021 as well as opening more pharmacies in their stores. This places them in a favorable position to benefit from the vaccine rollout program. Their profit margin has grown to nearly 10% even during the closing down of MUSICA.

ARGENT INDUSTRIALS LTD (ART:JSE)

Business Profile

Argent Industrial Ltd. operates as a holding company. The firm engages in the manufacture and trade of steel, steel related products and properties. It operates through the following segments: Manufacturing, Steel Trading and Properties. The Manufacturing segment produces branded consumer goods that are sold both locally and internationally. The Steel Trading segment offers ferrous steel, aluminium and stainless-steel products. The company was founded in 1972 and is headquartered in Durban, South Africa.

Technical

  • Long-term price volatility of Argent (Beta 0.32) is marginally better than Industry (Beta 0.4).
  • Earnings growth over the past year (29,7%) is higher than its five-year average (19,2%).
  • Sound Balance sheet at a very low price (Assets cover liabilities sufficiently).
  • More insider buying than insider selling of share over the last three months.

Fundamental

  • Small-Cap (R560mn).
  • Based on valuation of future cash flow, the company is trading at a 40% discount to fair value.
  • Very attractive PE ratio (6.1) compared to Industry (16.3) making it one of the cheapest in the market.
  • Growing profit margins is a great sign of value (6% vs 4,6% last year).

Summary

This company is well situated to benefit from a wide scale infrastructure rollout as stated in the South African Economic Reconstruction and Recovery Plan (ERRP) delivered by President Cyril Ramaphosa during 2020. This means that there will be significant spending involved to improve the South African economic landscape and Argent Industrials LTD is well positioned as a Small Cap company to benefit from such a wide-spread spending regime.

PPC LTD (PPC:JSE)

Business Profile

PPC Ltd. engages in the manufacture and sale of cement, aggregates, metallurgical-grade lime, burnt dolomite, and limestone. The firm operates through four segments: Cement, Lime, Aggregates and Other. The Cement segment includes the mining of limestone and the manufacture and supply of cementitious products. The Lime segment offers the mining of limestone, and the manufacture and supply of metallurgical grade limestone, burnt lime and burnt dolomite. The Aggregate segment is engaged in the mining and supply of aggregates and metallurgical grade dolomitic limestone. The Other Segment comprises the various consolidated trusts and trust funding relating to the broad-based black economic empowerment transaction. The company was founded in 1892 and is headquartered in Johannesburg, South Africa.

Technical

  • Long-term price volatility of PPC ltd (Beta 0.84) is higher than the Basic materials industry (Beta 0.61).
  • This share offers long-term potential at a fair discount as it is well situated to benefit from a nationwide industrial rollout program.
  • Stimulus inhabited environment places this company in a favorable position for the medium term.

Fundamental

  • Successful restructuring in of operations in the DRC.
  • Managed to avoid a rights issue.
  • Debt has been meaningfully reduced over the past five years.
  • After the appointment of new CEO in 2019, the company has resolved many key issues relating to their core business activities.

Summary

After the Restructuring and refinancing project update, operational update and renewal of cautionary announcement, by the board of PPC Ltd, shareholders and prosperous shareholders can be pleased with the significant progress in the implementation of a sustainable capital structure and the derisking of their balance sheet through the abolishment of its contingency agreements in relation to PPC Barnet (DRC operation).

Who are we?

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

What we offer

Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.

Disclaimer

This report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Contact Information

Main Office

Spaces A1, Kinetic Way Extension, Bridgeway, Century City Cape Town, 7441

Phone

Office: +27 (0)21 830 5777

EMAIL

General enquiries: info@caveat.co.za

Portfolio Management: FrancoisCaveat@protonmail.com

Website: www.caveat.co.za

Information and content

 The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).