Accentuate initially listed as SAFIC Holdings on the AltX during late 2006.  SAFIC Holdings was formed to house the initial two operating units of South African Fine and Industrial Chemicals ("SAFIC") and FloorworX (formerly Marley Flooring).

The rationale for bundling the two companies was that FloorworX is the market leader of local resilient flooring with over 60% of the market and SAFIC would supply the principal chemicals, cleaning agents, and equipment range that would maintain FloorworX flooring.  This cross-selling would bring synergy to the group that would not otherwise be possible, and (with restructuring) allow SAFIC to be profitable and better establish itself across the market.

Unfortunately, SAFIC's chemical business is highly reliant on the input of oil, thus the high oil price knocked its margins while it could not pass on the costs to its customers during the previous financial year.  On the other hand, the currently low oil price bodes well for this business...  On the restructuring note, SAFIC has made a strategic move away from sales volume toward that of quanlity customers that provide better anniuty-like income.  This has helped improve the businesses debtors days and allowed for a drop in transport costs.

During the latter part of 2007 Accentuate (then still known as SAFIC) acquired Centurion Glass & Aluminum (CGA) that slid into the Infrastructure division of the group along with FloorworX.  CGA is a manufacturer and installer of standardized and custom made windows, doors and shower enclosures.  While CGA does not have any form of a dominant market presence nationally, its operations are profitable and offer the group a broader product range with possibly further cross-selling opportunities.

Finally, the group recently added the business of Interior Wooden Floors (Pty) Ltd to its stable.  Interior Wooden Floors is an importer and / or distributor of quality engineered wooden floors and accessories imported from Sweden and have exclusive rights to its products from two main suppliers in Sweden, BonaKemi AB and AB Gustaf Kahr.

The acquisition was valued at around R11 million with the majority being paid out in cash (funded by the group's own cash resources) and the remainder being via the issue of share at 94c.

Of the two acquisitions since listing, it is interesting to note their relative sizes and earnings multiples:

• CGA was a deal worth R75 million
• Interior Wooden Floors was a deal worth R11 million

What is interesting is that the CGA deal is almost worth as much as Accentuate's current market cap of R79 million, and Interior Wooden Floors bumps this (implied) intrinsic value further up.  The CGA deal was done at a PE of 6, while ACE is now trading at a PE of 3.8.

While Accentuate has still to release its interim results for the period ended December 2008 (release date estimated to be 25 February), the group's financial position was relatively solid at the end of its 2008 financial year.

D:E was non-existant at 0.14 with a Current Ratio of 1.47.  There is a little questionable inventory build up with a Quick Ratio worsening from 0.93 from 2008 interims to 0.78 at 2008 year end.  Albeit, the group generated cash flow of 14.15 per share and declared a (very reassuring) maiden dividend of 4c per share.

This dividend puts the share on an historic yield of 5.4% and, combined with the historic PEG of 0.2 (based on EPS growth) produces a fairly high Relative Value Ratio of 27.  These indicators seem to indicate certain value in the small cap infrastructure play.

In conclusion, Accentuate has suffered the current market conditions despite a strong core FloorworX business.  While the addition of the restructuring SAFIC, the CGA play, and the Interior Wooden Floors businesses add a level of diversification to the group, they also add an element of risk.  Still, debt appears low and cash flow appears relatively strong for the empowered infrastructure play that has an element of chemical/environmental industry exposure.

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