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Category: Small Caps & Other Stocks

South African-listed small caps and a range of select other interesting listed stocks.

Hospitals: Overlooked Reopening Trade

Posted on 17/05/202203/05/2022 by Keith McLachlan

Some sales lost during lockdown are lost forever. The money that was not spent on restaurants, hotels, holidays and haircuts during lockdowns will not result in more being spent on these items after lockdowns. On the other hand, those that needed knee replacements, back surgery or other so-called “elective” medical procedures and delayed those due…

Pick of the Education Stocks

Posted on 12/04/202230/03/2022 by Keith McLachlan

Over the last month and a half, the three JSE-listed education stocks have reported their 2021 results (all have December year-ends, so the results are comparable). On the 23rd of February, private schooling group, Curro (COH), reported revenue growth of +15% from +9% learner growth (& fee increases), good cash generation and a strong recovery…

Obvious Value in Grindrod

Posted on 21/03/202204/03/2022 by Keith McLachlan

Well positioned and efficiently operated ports and railways have unique attributes that can make them attractive investments. Firstly, they have natural barriers to entry because once there is an (adequate) port or railway, no one is going to build one right next to it. Secondly, once ports and railways are built, they have a geographic…

Sabvest Capital Keeps Delivering

Posted on 31/01/202202/02/2022 by Keith McLachlan

I have a filter that I apply to investment holding companies (so-called “HoldCo’s”) to see whether it may be worth digging deeper into them: Is there an external ManCo? External ManCo’s can mean a misalignment of interest with shareholders. I want HoldCo’s where management are invested with other shareholders. How expensive is the HoldCo structure?…

Sprouts Farmers Market Inc

Posted on 09/11/2021 by Keith McLachlan

The ability to economically source, transport and sell fresh (i.e. time-sensitive & easily spoilable) produce at scale is a deeply geographical competitive advantage involving a surprising amount of complexity. Shoprite (SHP) only managed this in Africa by actively building up local supply chains in each of its countries to support its own retail footprint. Likewise,…

How is EOH’s Turnaround Going

Posted on 09/11/202129/10/2021 by Keith McLachlan

Following its dramatic fall from grace, EOH’s new management team have dug in deep, swept clean and driven a commendable operating turnaround. I have full respect for the excellent job they have done here. It is not an easy task to turn a service firm around. Service firms tend to trade based on reputation (services…

Who’s bidding for Long4Life?

Posted on 26/10/202115/10/2021 by Keith McLachlan

Long4Life (code: L4L) published surprisingly good H1:22 results and, importantly, beat many FY 19 high-water marks. The Group has done well over a difficult period. Founder and CEO, Brian Joffe, has also decided to step backwards and into the Chairman’s role (article). Most importantly and probably key to the recent share price rally, the Group…

Questioning RAIN’s Valuation

Posted on 29/09/202115/09/2021 by Keith McLachlan

Empowered investment company, African Rainbow Capital (code: AIL), reported its FY 21 results last week. The Group reported a +16.3% rise in their so-called Intrinsic Portfolio Value to R12.3bn, albeit once the recent dilutive capital raise is excluded, the Group saw its Intrinsic NAV (INAV) fall -8.1% y/y. Plenty has been written about this HoldCo’s…

Master Drilling: Cylinders Starting to Fire

Posted on 14/09/202105/09/2021 by Keith McLachlan

Logically, as shallow, easily mined minerals are exploited, the world’s remaining minerals are getting deeper underground. While these tailwinds are fantastic for those well-positioned businesses that offer solutions to underground miners, the multi-year commodity and mining hiatus has been a tough period for all involved. This is clearly noticeable when looking at the Fochville-based, global…

ADvTech Update Highlights Quality

Posted on 23/08/202112/08/2021 by Keith McLachlan

Listed educational group, ADvTech Ltd (code: ADH) put out a commendable trading statement for their H1:21E period. The Group—that owns Crawford International, Varsity College, & Rosebank College, amongst others—sees all its divisions delivering an increase in operating profit. Perhaps more importantly, if one-offs are excluded, the ADvTech’s profits are expected to be between 28% to…

Is Levi Strauss the next Nike?

Posted on 04/08/2021 by Keith McLachlan

The pandemic has accelerated the casualisation of the workplace, since all one has to do is look smart from the waist up in a Zoom meeting: Keith McLachlan from Integral Asset Management. Hear the interview here: LINK

Underappreciated Gold Mine

Posted on 26/07/202116/07/2021 by Keith McLachlan

Of all the JSE-listed gold miners, I get the sense that Pan African Resources Plc (PAN) is just simply underappreciated. Why? Probably because it is relatively small. Yet, size is not necessarily correlated with quality, and the gold junior stacks up well against even the majors. Despite Pan African Resources’ modest R7.5bn market cap, the…

Ready. Set. Huda-GO!

Posted on 13/07/202106/07/2021 by Keith McLachlan

ORIGINALLY APPEARING ON MONEYWEB Hudaco’s H1:21 results look spectacular when compared to H1:20 numbers, but H1:20 was mired in hard lockdown creating a distorted picture. H1:19 is far more comparative as a “normal” trading period. Against H1:19, Hudaco’s H1:21 revenues grew +6.5% p/p, margins expanded seeing Gross Profit rise +9.0% p/p, operating leverage rallied Operating…

Distell’s Worth to Heineken

Posted on 09/06/202101/06/2021 by Keith McLachlan

Previously, I highlighted that Distell Group’s (code: DGH) was on a winning wicket coming out of this pandemic (Distell: Quietly Winning). Subsequently, Distell broke the news that Heineken has approached the Group regarding the acquisition of the majority of Distell’s business (see official SENS here). For the purposes of this article, let us ignore the…

Who Eats Whom

Posted on 06/06/2021 by Keith McLachlan

The current debate of whether inflation is transitionary or structural has a sub-argument that references rising soft commodity prices, food inflation and struggling consumers and argues that food producers will be caught in the middle. This narrative makes some sense, rising input costs cannot be fully passed onto struggling end-consumers and someone is going to…

How Much Could EasyEquities Be Worth?

Posted on 18/05/202107/05/2021 by Keith McLachlan

A combination of boredom, lack of dopamine alternatives, stimulus cheques and the gamification of markets led the USA-based online stockbroker, Robinhood, from relative obscurity into a multi-billion dollar empire. This slick operation has amassed an estimated 20 million brokerage accounts and attracted a last-recorded $20bn fair value (even though shares have reportedly traded on the…

Safer than Houses: Stor-Age Property

Posted on 19/04/202112/04/2021 by Keith McLachlan

About five years ago I pointed out that the local commercial property sector (i.e. REITs) in South Africa was heading for trouble (see Part I and Part II). I would have preferred to be wrong but—and in no small part helped by the pandemic—this has played out as expected and almost every single REIT on…

Profiting Off Delistings

Posted on 24/03/202115/03/2021 by Keith McLachlan

All shares prices on all stock markets around the world are minority valuations. They reflect what markets think an investment without control is worth. The moment an investor takes control of a company, though, they can—effectively—access the cash flows of that business. And, for this reason, that control is worth something. Therefore, bids to take…

JSE-listed Preference Shares

Posted on 19/02/202110/02/2021 by Keith McLachlan

Preference shares are an underappreciated asset class, particularly for income-seeking private investors who are less constrained than institutions when it comes to liquidity. But what are preference shares? Preference shares are shares with special rights attaching to them. Each preference share is unique but most have the following characteristics: Dividends: Preference shares typically pay a…

Trellidor: Building up to a Rally

Posted on 07/02/202102/02/2021 by Keith McLachlan

Originally published over here. Cashbuild (CSB) recently indicated that their sales till end of December 2020 had jumped +24% y/y. Massmart too has indicated a strong second-half recovery in their Builders Warehouse sales with Spar’s BuildIT outfit echoing the same sentiment. While these are great results, they are not unique. Building materials, DIY and home…

Afrocentric vs. Discovery

Posted on 27/01/202120/01/2021 by Keith McLachlan

ORIGINAL ARTICLE APPEARS HERE. Having listed on the JSE in 1999, Discovery Ltd (DSY) has been a phenomenal success generating early investors multiples of their money. The Group administers the Discovery Medical Aid (a separate legal entity to the listed company) and, through data mining, clever incentives and cross-selling, the Group has won huge medical…

Redefine Properties: Is this REIT-listic?

Posted on 23/01/2021 by Keith McLachlan

Late on Friday, Redefine Properties (RDF) published its long-awaited dividend announcement for the year-ended August 2020. You can find the full announcement here: LINK. A Real Estate Investment Trust (i.e. “REIT”) has some special privileges and they come with some onerous requirements. If you don’t satisfy the requirements of being a REIT, you lose the…

Finding value in SA’s small- and mid-cap sector

Posted on 26/11/2020 by Keith McLachlan

Diversification across sectors is the best hedge against bad luck, stresses Keith McLachlan in a Moneyweb interview. Find the full interview over here: LINK.

Small & Mid Cap Snap Back

Posted on 05/11/202026/11/2020 by Keith McLachlan

Click on the embedded video below to play it.

Ascendis Health: Why I Sold

Posted on 27/08/2020 by Keith McLachlan

OLD ARTICLE – Original posted on March 29, 2017 I have been following Ascendis Health since it listed and, while I was sceptical at first, I warmed to the company as I saw management executing their stated strategy. If you see here, I even use them as an example of how acquisitive growth can work: How…

EOH: The Cracks Appearing

Posted on 27/08/202027/08/2020 by Keith McLachlan

OLD ARTICLE – Original posted on July 28, 2017 It may sound like I am picking on EOH Holdings (EOH), but I am not. My job is to look critically at companies and, where appropriate, disagree with the consensus view. Even if this is uncomfortable and hurts peoples feelings, it is important that I do…

Master Drilling: Illustrating Value

Posted on 27/08/202027/08/2020 by Keith McLachlan

OLD ARTICLE – Original posted on March 22, 2018 I have written about Master Drilling (MDI) previously and I refer you back to these articles for some of the narrative: Master Drilling: Hidden Gem Master Drilling: The Big Mistake You will notice a consistent theme: I like them. The Group recently put out some soft…

Master Drilling: The Big Mistake

Posted on 27/08/2020 by Keith McLachlan

OLD ARTICLE – Original posted on August 26, 2016 Previously I wrote the following article on Master Drilling (Master Drilling: Unknown Gem). I will not rewrite the investment case that I noted in that article for Master Drilling as a world-class, niche industrial technology play with global, growing scale and sophistication. Pretty much all of that…

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RSS Research Reports

  • Renergen – Funding (Almost) Secured
  • Renergen – FY 22 Results – Token Update
  • Trellidor Door Holdings – H1:22 – Series of Unfortunate Events
  • Renergen – Government Investor Highlights Virginia’s Value
  • Sabvest Capital – FY 21 – Great Performance with More to Come

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