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Why I LOVE this share
In
January 2020 I told investors Argent is heavily discounted – possibly as much as 60%...
The share traded at 540c at the time.
The share price traded between 595c and 680c at the time.
Here’s what I told investors:
“Argent Industrial (JSE: ART) is a small JSE listed industrial company.
Its main businesses are in the steel industry, supplying warehouses with overhead cranes, pallet trucks, storage systems, trolleys for shops, and gates and burglar proofing to homes and businesses alike.
Back in 2015 the company was mainly a local business, with some growing and some struggling businesses in its portfolio.
It then set out to get rid of, or turn around, struggling businesses. And more importantly it started diversifying its income streams by investing into businesses in the USA and the UK…
This strategy helped the company increase headline earnings per share (HEPS) from a mere 40c, to 104.4cps in 2019. That’s 155% growth in profits, showing their strategy worked.
And right now, the company’s still selling at a 65.9% discount to what it is really worth. Net asset value per share, a measure of the value of all the businesses and investments the company holds, sits at a whopping R17.46. The share price is at a mere R5.95 at a 65.9% discount to its real value.
The company is unencumbered by high debt levels, and is cash flush. What’s more, the business has gone from only about 20% of its profits from offshore sources to now being in excess of 60% offshore based.”
Today Argent shares are trading at 894c. That’s up 65% since January last year.
But I believe there’s more coming for investors.
You see, the latest institutional investor report shows there’s a lot more upside potential!
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What this institutional research is saying about Argent today
On 15 January 2021 I received an institutional research report about Argent.
It’s not often that the big guys write about small companies like this.
So, when they do, you can expect a lot more interest to stream in, and the share price to start rapidly rising in months to come…
The report cited Argent’s growing offshore businesses as a major attraction in investing in the company.
In fact, the report had a little table in which it gave estimated values for the company’s shares…
According to them – if Argent grows at a 4% rate going forward – its shares are worth somewhere between R10 and R12.
If the company grows at 6% the shares are worth somewhere between R11 and R13.57.
At a 10% growth rate – the company’s value is worth around R18.
Here’s the thing – when Argent last released results it grew headline earnings per share by 47%.
Now sure – it won’t be able to grow earnings that much every year. But using al of its excess cash to do share buybacks, and an offshore acquisition here and there it can easily meet 6% growth, possibly more.
That means we’re looking at R13.57 or more as a target price for 2021…
This is definitely one to keep your eyes on this year.
Here’s to unleashing real value
Francois Joubert
Editor, Red Hot Penny Shares
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