Publications
Partners
Johannesburg - Listed steel firm Argent Industrial is trading at a 42% discount to its reported net asset value and this may present an opportunity to investors, according to a local market commentator.
François du Plessis of Vega Capital says Argent has been "a victim of sentiment" over the last few months. "The share price is trading at a deep discount to its underlying net asset value."
Argent is a steel merchant, with steel trading making up approximately 43% of group turnover. Thirty seven percent of the group comprises companies which beneficiate or add value to steel either via manufacturing or through steel service centres. Group activities include ready-mix concrete, railway retarders and engine refurbishment across South Africa and North America.
On Wednesday, Argent reported its interim financial results for the six months to end-September 2008 saying revenue rose 23.7% to R1bn. After-tax operating profit came in at R96m.
With earnings of 106c per share, the company trades at on a historical multiple of four times earnings.
The company also declared an interim dividend of 19c per share which would put it on an historical dividend yield of five times its share price.
Argent says its net asset value is 1 310c a share.
Du Plessis believes that the deep discount to net asset value and the strong dividend yield may put a company like Argent on investors radars as they begin to seek value.
Since the start of 2008, Argent has seen its share price decline from 1 850c to hit a low of 710c earlier this week. At the end of the June quarter, the company was trading at 1 450c. Funds were net sellers of Argent at these levels. Funds sold R25m worth of shares during this period.
Argent CEO Treve Hendry says while the automotive market and, to a lesser extent, the retail market pulled the results down, "this was more than adequately compensated for by the strong performance of the steel trading and steel manufacturing businesses".
Hendry says that the automotive businesses are expected to recover in the second half of the year due to new business being secured, particularly in the exports market. The company will also benefit from increased export margins due to the weaker rand in the second half of the year.
By 16:00 on Thursday, Argent was trading up 25c (3.4%) at 750c per share.
- Fin24.com
