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SHARE WATCH: Focus on 5 exciting small caps

Oct 05 2015 08:38
*Kirk Swart

(iStock)

Company Data

QUANTUM FOODS HOLDINGS LIMITED [JSE:QFH]

Last traded 4
Change 0
% Change 0
Cumulative volume 67282
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

CALGRO M3 HOLDINGS LIMITED [JSE:CGR]

Last traded 3
Change 0
% Change -3
Cumulative volume 2061
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

ALVIVA HOLDINGS LIMITED [JSE:AVV]

Last traded 14
Change 0
% Change 0
Cumulative volume 12397
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - This week’s five shares to watch will look at some exciting small-cap stocks.

1. Pinnacle Holdings [JSE:PNC]

Pinnacle Holdings is one of the continent's leading information and communication providing companies. They have managed to deliver strong financial results over the last 18 years with profit growth that has averaged over 40% per annum. This growth will slow as the company matures and deliver a more constant revenue stream.

At the height of all optimism in 2013, Pinnacle traded just below R27. Today it is trading at a share price just shy of R13 after one of the company's directors was accused of bribery in 2014. The charges have subsequently been dropped.
For the year to end-June, Pinnacle increased revenue by 12% to R8bn and gross profit by 4% to R1.1bn.

Pinnacle trades through four subsidiaries namely Pinnacle Africa, Centrafin, AxizWorkgroup and Datanet. It offers a wide array of IT products such as Microsoft, Dell, Intel, IBM and Hewlett-Packard as well as its own Proline products.

Pinnacle is trading at a low price to earnings ratio of 7.

2. Calgro M3 [JSE:CGR]

Calgro M3 is a black-empowered residential developer offering services such as township establishment, civil and electrical infrastructure services, project management services, land acquisition, marketing and sales, and construction services.

In a recent trading update, Calgro M3 advised shareholders that they expect headline earnings per share (Heps) to increase between 19.97% and 39.98% for the six months to August 31. This is equal to Heps of between 61.15 cents per share and 71.35c/share.

Calgro M3 carry out projects on their own, but in many cases they partner with government departments to develop low-cost housing projects for the upcoming black urbanising market.

Calgro M3 is trading at a price to earnings ratio of 18.

3. Quantum Foods [JSE:QFH]

A spinoff from Pioneer Foods, Quantum Foods is a diversified feeds and poultry business selling in both the South African and selected African markets.

In the South African market it owns established animal feeds business Nova Feeds. Nova Feeds focus on animal nutrition supplying to their in-house poultry operations as well as externally to customers operating in the poultry, dairy, sheep, ostrich, pig and cattle business. Quantum's other South African operations include a broiler division and an eggs & layer livestock division. The broiler division operates under the Tydstroom brand and the eggs & layer division under the Nulaid brand.

Recently Quantum Foods published a trading update in which it foresees Heps for the year to end-September 2015 to increase by at least 343% to 49c/share.

This leaves Quantum on a minimum price to earnings of 7.22.

4. Tower Property Fund [JSE:TWR]

Tower Property Fund is a property company with a diversified portfolio of 44 properties consisting of office, retail and industrial properties. Most of their properties are situated in Cape Town, with Gauteng and KwaZulu-Natal adding to the list. Being in a growth phase, Tower completed a successful book build of R500m in June 2015. The money raised from the book build helped to partially fund the acquisition of the Croatian property VMD KVART via Tower's European subsidiary Tower Europe.

The acquisition is believed to offer Tower a yield of 8.5% and a secure cash flow thanks to a five-year head lease by the seller VMD Grupa.

Tower is trading at a price to earnings ratio of 11.

5. Sygnia

Sygnia is an asset management company with R137bn of assets under management. It will have its initial public offering (IPO) on October 14 2015. This IPO will follow the successful listing of asset managers like PSG Konsult and Anchor Capital, which listed in recent times.

Sygnia spun out of African Harvest in 2006 and has since made considerable inroads in the institutional asset management space. With a big portion of Sygnia's clients being institutional, it is trying to enter the retail space with some low-cost index tracking funds.   

Sygnia will start listing at a price of R8.50, which places it on a price to earnings multiple of 14-15 according to some analysts. The company wants to raise between R250m and R300m.

Do you agree with Kirk's stock picks? Send us yours and tell us why.

* Kirk Swart is an analyst at Overberg Asset Management, an Authorised Financial Services Provider (No 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.

Disclaimer: The above article does not constitute financial advice and is not a recommendation. Investors must always seek the advice of professionals and trade with caution. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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