Argent

Argent (JO:ARTJ) is a company which deals in manufacturing and commodity trading in South Africa, the UK and America. It beneficiates aluminum and steel into products which are sold both at the retail and wholesale levels. It has many brands which are well-established in the retail market such as X-Panda, Jetmaster and American Shutters. It also supplies a range of steel products to industry such as rolled steel, tube, coil and plate which it beneficiates by bending and cutting. It manufactures ladders, desks, fencing and gates. It is the largest distributor of aluminum products for Hulamin (JO:MTNJ). It is well diversified both by product and geographically.

In its recently published results for the six months to 30th September 2022 the company reported revenue up 13,5% and headline earnings per share (HEPS) up 22,4%. It is extremely well-managed and tightly controlled. At the current share price of 1498c, it is trading on a price: earnings multiple (P:E) of just 4,02 and a dividend yield of 4,65%. This means that it represents considerable value and has solid upside potential.

The company is engaged in a share buy-back program which has resulted in it reducing its shares in issue by one third since 2016. In the current six months it has bought back over 1m shares at an average price of 1281c per share. Whenever it buys back shares for less than its net asset value (NAV) the financial effect is to raise the NAV for the remaining shareholders.

Consider the company’s track record of growing its HEPS over the past 8 years:

You can see that HEPS have increased every year consistently over that time period, and that the average gain is 54,6%. This gives the share an incredibly low price:earnings growth (PEG) ratio of just 0,074. To put that figure into perspective, the general rule with PEG ratios is that anything below 1 is considered to be good value. One of the reasons for that very low PEG is that the company did not pay dividends for three years from 2019 to 2021 - but it paid a dividend of 42c for the year to 31st March 2022 and is paying out a dividend of 45c for the six months to 30th September 2022. The board of directors says:

“Despite the global inflationary fears and increased costs of borrowings, the Argent group of companies are well-positioned for another incredibly good year”.

The subject of the PEG ratio is explained in our lecture module 10.

Technically, the share gave a strong on balance volume (OBV) buy signal on 6th February 2018 at 388c. Since then, the share has risen by 286%. If you are not clear on OBV refer to our article, “On Balance Volume”.

Despite the fact that it has already risen substantially, because of its low P:E and PEG ratios and well as a relatively high dividend yield, we consider it to be exceptional value, even in the current bear market. Consider the chart:

Chart by ShareFriend Pro

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