New Kids on the Alt-X Block

Things are really hopping on the Johannesburg Stock Exchange’s Alt-X board as we close out 2006. In the past two weeks alone, three new companies have joined the small enterprise-focused market. Let’s take a look at these newcomers:

1) Safic Holdings, a chemical and flooring company, joined the market at R1.20. Today it trades at R0.92. This represents a price to net tangible assets ratio of 1.56. Management projects earnings to double by mid-2008.

The company hopes to benefit from the infrastructure boom leading up to the 2010 World Cup. The company is South Africa’s leading supplier of resilient floor coverings and a manufacturer of environmentally friendly cleaning agents.

Says the company CEO, Fred Platt, “We see enormous potential for growth, both in the chemicals company through the widening of our distribution network and the introduction of new, environmentally friendly products, and in the floorings business where the principal strategy will be to grow through acquisition.”

2) SilverBridge Holdings provides software to the financial services industry. It debuted on November 27 at R3.50 and now stands at R2.30.

The company expects to nearly double its profits in 2007. CEO, Freda du Toit, makes her pitch as follows, “We are highly cash-generative, half of our business is annuity-based, and we have a controlled acquisition strategy to ensure continued, sustained, healthy growth."

3) Africa Cellular Towers is the only company of the three that trades higher today than at its listing on November 29. It is priced at about 8x forward earnings.

The company does exactly what you would think. It constructs cellular towers and associated equipment. In its seven-year history, it has constructed 3000 towers in some of Africa’s most remote locations. The company also operates in the Middle East and India.

Margins are high in this business. Operating profit margins come in at around 22%.

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