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SHARE WATCH: Some small cap and value plays

May 10 2016 10:35
Kirk Swart
iStock_share watch


Company Data

METAIR INVESTMENTS LIMITED [JSE:MTA]

Last traded 23
Change 0
% Change -1
Cumulative volume 2338
Market cap 0

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

PICK N PAY STORES LIMITED [JSE:PIK]

Last traded 66
Change -1
% Change -1
Cumulative volume 140725
Market cap 0

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

WOOLWORTHS HOLDINGS LIMITED [JSE:WHL]

Last traded 47
Change -1
% Change -2
Cumulative volume 2123934
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 - Overberg Asset Management analyst Kirk Swart looks at some interesting small cap and value plays in this week's five shares to watch.

1. Metair [JSE:MTA]

Metair is a company in the industrial space whose focus is manufacturing and supplying products to the automotive industry. Each of Metair's seven operating units and two subsidiaries have their own product focus. Metair supplies products such as batteries, shock absorbers, springs and various other motoring products. These automotive parts are supplied to the South African assembly of new vehicles.

Outside of South Africa, Metair has a Turkish business that exports batteries and parts into Russia.

Metair is in the process of moving away from the cyclical assembling of new vehicles to a more stable aftermarket business by moving into the energy storage space. Energy storage is already contributing 58% to revenue with automotive parts contributing 42%.

Metair is trading at a price to earnings (P/E) ratio of 9.2. The low P/E ratio is probably justified given Metair's single digit growth figures.  

2. Capital and Counties Property (Capco)

Capco is a property company in the UK that creates shareholder value through its two central London estates, Covent Garden and Earls Court. Capco is targeting an estimated rental value (ERV) of £100m by December 2017 and are well on track to achieve that.

The company has a conservative loan to value ratio of 18%. With Capco being exposed to the Pound Sterling, the share price has come off due to Brexit fears. Having dropped from a R100 per share in January to R75 currently, Capco is an attractive entry into the UK property market for investors who are willing to look beyond the short term political noise.  

3. Pick n Pay [JSE:PIK]

Pick n Pay is well underway with their turnaround strategy. The market has rewarded Pick n Pay for their efforts with a share price that has increased from R52 in January to R76 in April.

Pick n Pay has been revamping its food retail division and has actively entered the clothing space. It would seem that it is trying to take back lost market share from Woolworths [JSE:WHL]. Believing the turnaround strategy, the market is placing Pick n Pay on a lofted P/E ratio of 33.

The market might be too optimistic. For the year ending February 2016, Pick n Pay only grew like for like turnover by 3.8%. The lofted P/E ratio can be ascribed to the 175 new stores Pick n Pay added. However, the 175 new stores only added 4.1% to total retail space.

4. Holdsport [JSE:HSP]

Holdsport is a company that I have previously covered which is worth mentioning again. Holdsport consists of three operating divisions namely, Sportsman's Warehouse, Outdoor Warehouse and Performance Brands.

For the year ending February 2016, Holdsport managed to increase sales by 12% and gross profit by 13%. These double digit growth rates are achieved with the share rated on a P/E ratio of 12 and in tough trading conditions.

The Sportsman's Warehouse division contributes 74% to revenue, Outdoor Warehouse 23% and Performance Brands 3%.

5. Stefanutti Stocks [JSE:SSK]

Stefanutti Stocks is one of South Africa's leading construction companies. The construction industry has found it tough in the last few years as the economy has slowed, competition increased and government spending hasn't come to fruition. Operating across four divisions, Stefanutti managed to increase adjusted EBITDA by 7% while top line revenue remained flat.

The subdued economic conditions are captured in Stefanutti's share price that is trading at a very low P/E ratio of 4.

These levels might present an opportunity for investors who are willing to wait out the cycle. Although the construction sector is under pressure, a P/E of 4 will interest some deep value investors.

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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