Infrasors: Snap Shot

Written by Keith McLachlan
Wednesday, 24 June 2009

With a 12-month high of 245c and a low of 3c, Infrasors is a perfect picture of the local small cap listing boom and subsequent bust. In the midst of the listing boom and on the wave of the hype of "construction-related" companies, the group was cobbled together out of a number of businesses that supplied aggregates, cement, silica and various building materials.

While Infrasors initially aimed at raising R385 million to list, it is notable that even at the peak of the hype it could only raised R264 million. Despite the shortfall, the company went ahead with the listing in mid-2007. The share was initially placed at 550c, which is an aggressive PE of 15 times with a forward PE of 13, but when it never made its profit forecasts and the market imploded around it, it was an inevitability that it would flirt with penny stock levels (i.e its share price touching 3c).

Currently, though, the share is trading at around 50c with a historic PE of 3.14 (without paying dividend, though). Almost 90% of its most recent results revenues were generated by its "Aggregate Products" and "Sand" segments and the group remains fairly liquid with over R50 million of cash on its balance sheet, Current and Quick Ratios are 2.23 and 1.91 respectively...but D:E is a little high at 0.43.

While the group as it stands now is simply too young for any normalized profit analysis and valuation, the directors explained in their latest results (released in May this year) that "...the anticipated downturn in the South African economy and global financial instability has resulted in a slowdown in demand by Infrasors' key clients in industry and construction. Such circumstances have had a knock-on effect impacting on production demand and off take at Infrasors' mines. Infrasors' principal subsidiaries, Lyttelton Dolomite, Delf Sand and Infrabric continue to be profitable, solvent, cash generative and fully operational. The businesses are well managed, fully capitalised and financially healthy. ... Whilst demand for the group's products and services has fluctuated in certain industries pursuant to the economic downturn, Infrasors' overall position as a producer and supplier of base minerals and materials remains essential to its customers and the end users."