Cheap it may be, Value Group still gives investors jaundice
Thin JSE trade after upbeat results as nobody wants to chance their arm on the small-cap logistics player
Niche logistics player Value Group perfectly illustrates the prevailing small cap malaise on the JSE. The group’s share price was up 17.24% on Wednesday following a not entirely unexpected upbeat trading statement covering the year to end February.
But that might not be a reason to celebrate.
The price jump only shows the level of scepticism in the market over small-cap company prospects – with few punters willing to chance their arm once the earnings range was confirmed. The volume traded was 21,000 shares, which can hardly be construed as a market enthusiasm.Jaundiced market sentiment aside, Value once again showed the resilience in its “lean and mean” business model with headline earnings set to range between 80c/share and 91.7c/share. This represents an increase of between 36% and 56% over the previous financial year.The earnings surge was driven by an increase in revenue that was accelerated at profit level by effective cost curtailment efforts. Admittedly, the costs of an empowerment scheme did not reoccur in this financial year, which skew somewhat the comparative figures.
But Value’s trading statement did make a point of explaining that if the once-off BEE equity transaction cost was set aside for comparative purposes, then normalised headline earnings would have been between 13% and 29% higher.Although faithful Value shareholders will be disappointed that the share still attracts a desultory forward earnings multiple of 7.5 times, they can at least start fantasising about a decent final dividend payout.