Small cap stocks on the JSE have become a haven for bargain hunters and there are likely to be more buyout offers to minority shareholders and delistings following similar schemes by Bell Equipment and Sasfin earlier this week, which were well appreciated by the market.
Sasfin and Bell soared on the JSE on Monday after dangling buyout offers to minority shareholders at premiums of 65% and 71%, respectively.
Yesterday, Sasfin was trading 3.86% stronger on the JSE just after midday at R27.19 per share.
However, Bell Equipment was up 0.36% at R49.75 per share as the market digested suspicion that there may have been insider trading after the company’s share rallied 9% on Friday prior to Monday’s R5 billion buyout offer announcement.
Market analysts say JSE small cap stocks have become a haven for value-seeking investors, especially with companies dangling significant premiums for buyout schemes.
“SA small caps are a bargain hunter’s paradise. Investors simply don’t have enough exposure to this sector,” said Piet Viljoen, fund manager at MW Investments.
Rod Lowe, director of value asset management at AG Capital Value Flexible Fund, said “there are many opportunities” in South African small cap stocks “despite how ugly they may look (from a) buy and sell” perspective.
Market analyst Simon Brown told Business Report yesterday that small caps were looking lucrative on the JSE. He added that there were likely to be more rewarding investment deals in small caps on the JSE, although this was also likely to occasion further delistings from South Africa’s biggest stock exchange.
“I think they (small caps) are a bargain hunter’s paradise. There are lots of very cheap good businesses on the small cap space and more delisitng are likely,” Brown said in an interview.
Andrew Bahlmann, chief executive for corporate advisory at Deal Leaders International, said yesterday that the Bell Equipment buyout scheme was “a good move” as a merger and acquisition transaction.
“The (Bell) share price is highly illiquid and closely controlled by the Bell family – so no other form of offer was likely to succeed. But that may not always remain the case, even though the Bell family have demonstrated they are not selling or going anywhere,” Bahlmann said.
He agreed with the company’s board which said the unlisted environment would offer it the ability to take a longer-term view in its approach to managing the company and its business undertakings and strategic decision-making.
Sasfin also cited similar opportunities offered by operating as a non-listed entity. Other analysts said shares in Sasfin were “fairly thinly traded, with only about R110 000 worth of shares changing hands” on an average day.
In February, Sasfin said it had received a civil summons from the South African Revenue Service for a damages claim of R4.8bn plus interest and penalties in respect of income tax, VAT, and penalties allegedly owed by former foreign exchange clients of the bank. The investment banking and brokerage services company has a market capitalisation of just R846 million.
BUSINESS REPORT