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Cape Town - Overberg Asset Management analyst Kirk Swart looks at some interesting small-cap stocks in this week's five shares to watch.
1. Consolidated Infrastructure Group Limited [JSE:CIL]
Consolidated Infrastructure Group (CIG) has its focus on energy. The Group develops and installs high-voltage electrical substations in Sub-Saharan Africa and operates in multiple sectors such as mining, logistics and waste management.
The Group provides and installs overhead electrical cables that transmits high voltage electricity. CIG also plays in the renewable energy space. Operating in 21 countries in Africa and 3 in the Middle East; CIG generates more than 50% of their revenue outside of South Africa.
The group should release their interim results for the year ending February 2016 in the coming months. They would look to improve on the good results they delivered in August 2015. Revenue grew by 37% and headline earning per share grew by 17.5%.
2. The Value Group [JSE:VLE]
The Value Group provides a wide range of logistical solutions throughout Southern Africa. Through its various subsidiaries it offers transportation, distribution, warehousing, import and export, material handling and maintenance services.
The group delivered a big improvement on their results for the interim period 2015. Headline earnings per share jumped by 134% after the successful implementation of various restructuring initiatives. The group should release their results for the financial year ending February 2016 in the coming months.
Although the restructuring seems to be bearing fruit, management sights the tough economic environment and rising interest rates as variables that will soften demand.
3. Calgro M3 [JSE:CGR]
Calgro M3 is a housing developing company that does property development in South Africa. It provides end to end property solutions, from the land acquisition, to the selling of the completed units. The group`s housing solutions target specific markets, in different LSM`s - primarily in Gauteng.
Calgro M3 has its financial year end in February 2016 and will release its year end results in the coming months. For the interim period ending August 2015 they delivered a very strong set of results. Headline earnings per increased by 29.4% with return on equity at 29.6%. The board is targeting a minimum ROE of 30% over the medium to long term. Calgro should stand to benefit from governments expanded housing development programmes.
4. AdaptIT [JSE:ADI]
Adapt IT is an innovative IT company that grows earnings through acquisitions and organic growth. The company operates across 38 countries worldwide and delivers IT solutions across various fields. Adapt IT delivered an excellent set of results for the six months ending December 2015. Headline earnings per share grew by 42.4% and revenue grew by 19%. Of that 19%, 13% was organic growth and 6% was acquisition growth.
The group recently acquired CQS Investments, a third party software distributor across Africa, as well as the intellectual property and operations of a New Zealand based company that offer student management systems. We can therefore expect acquisition growth to be higher in the next reporting period.
5. African Oxygen Limited [JSE:AFX]
African Oxygen Limited (Afrox) is a member of the Linde Group and is the biggest supplier of welding and gas products in South Africa. It also operates in 10 other African countries. The company opened doors for business in 1927 and first listed on the JSE in 1963.
In 2014, Afrox launched a turnaround strategy that yielded the desired results. A new operating model was employed to adapt to the tough economic conditions. The change has seen headline earnings per share move back into positive territory at R1.39 for the period ending December 2015. Return on Equity also increased to 14%.
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* 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.
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