Forward Corporation, the industrial holding company, looks a striking value play.
The company, which notched up a 153 percent hike in headline earnings in the year to end June, is accorded a modest 7,5 times price:earnings ratio and also trades at a discount to a R6 a share net asset value despite indications that an array of non-core operations could be sold off. The 25c dividend surely confirms that the ghost of former W&A Holdings, which was overloaded with debt by Jeff Liebesman in the early 1990s, has been exorcised?
Trencor, which owns six percent of Forward and an option to take a much bigger stake, looks to have the business accelerating in the right direction. That direction is offshore.
On Friday Cecil Jowell, the chairman of Forward, wouldn't hazard a guess at what proportion of bottom line the company would generate offshore by the year 2000. Offshore businesses, like London-listed AAF plc, Formscaff and WACO Kwikform, generate over R1 billion in turnover and R92 million (or 40 percent) of operating profit.
Commentary accompanying Forward's latest results suggests that further investments will be made offshore in the core equipment rental divisions. This strategy will presumably go hand-in-hand with Forward's plans to dispose of non-core operations. The non-core operations comprise Gentyre (the tyre manufacturer), MacPhail (coal distribution), Textiles, the Retail division (John Craig and Safshoe) and the Fastener Division (Natbolt and Avdel).
Jowell admits that Gentyre is talking to Continental AG, the company's technology partner, with a view to taking an equity stake. "We've been talking to Continental for 10 years and would certainly like them to be involved more in the financial side of Gentyre."
While market conditions will probably stifle efforts to dispose of the loss making Fastener division and the textile interests, Macphail (now profitable again) and the retailing interests particularly with footwear retailers like Tiptoze and Select-a-Shoe shouldn't struggle to find suitors.
Prospects for Forward look encouraging with the equipment rental division set to increase operating profits again in the 1999 financial year. The company is ungeared with a pile of cash on hand. With things going to plan it's highly likely that Trencor, already invested heavily in Forward, will exercise its options in mid-2001. With this in mind investors could do a lot worse than chancing their arms at current levels.
PS This is just a message to the reader who wanted me to take Mercantile Lisbon Bank Holdings to task because he felt their public share placement was too stingy. Sir, maybe you will feel better when you realise that Mercantile, which listed at R3, is now trading at well below issue price. Now you can get the shares you wanted at a helluva discount ...