I've mentioned previously that I like Keaton Energy (KEH) more and more the further and further its share price slides (see 'KEH, PAN & ISA').

Ignoring this background to the junior coal developer-come-miner, Keaton made a very clever acquisition of Leeuw Mining a while ago. This not only meant that the Group acquired a producing anthracite mine near RBCT that come with allocation, but it also added further pipeline to its exploration/development portfolio. Further more, Keaton also brought the Gunvor Group Ltd in as a strategic shareholder in the Group.

The acquisition was dependent on approval by the Department of Mineral Resources and, in Keaton's latest SENS today, the Group reports that the Minister has consented to the change in control of LME, in terms of Section 11 of the Mineral and Petroleum Resources Development Act.

Great news for Keaton where its CEO, Paul Miller, says that "This is a very welcome final step in the transaction to acquire a controlling interest in LME. We now look forward to consolidating LME into the Keaton Energy group."

Perhaps the market will start to factor a little faith into the share price? We'll see, but already the share price has jumped from an intra-day low of 252cps to its current spot of 275cps on some light volume.

Moving onto a company that is doing the exact opposite corporate actions of Keaton, Accentuate (ACE - formerly Safic) has just sold its CGA business for a fraction of what it paid for its a couple years ago.

CGA is a glass and aluminum business that has not just cost Accentuate dearly in losses, but has injected politics into the Boardroom. Neither are good things when trying to navigate a construction-related small cap through the currently tricky local construction market.

The Group will be receiving c.R9,5m for CGA, despite paying c.R40m in late 2007 for the business. That said, CGA has turned into a terrible investment for the Group and management admit that it has recently become a "...drain on the resources of the group... [and] ...has taken up a disproportionate amount of Accentuate management time and resources..."

What is encouraging is that Accentuate's pro-forma financial effects reveal how if CGA had been disposed of for the full FY 11 that HEPS would have swung from a loss of 3.72cps to a profit of 8.72cps. This would put ACE shares on a PE of 8.0x.

AVI is really a quality food counter with strong footwear and apparel interests. The Group's latest SENS continues this trend as the management indicate that they expect "...consolidated HEPS for the continuing operations of the Group for the six months ending 31 December 2011 are expected to increase by between 20% and 30% over the comparable period in the prior year."

The problem is that AVI share trade at a premium to the Food Producer's index PE of 14.35x... But, and here's an interesting thought, AVI's PE is actually quite a discount to the general retailer's index of 16.9x. The Group receives almost a quarter of its revenue from its fast growing 'Footware and apparel' and 'Personal care' segments that, arguably, have more in common with fashion retailers than any food producer currently listed on the JSE.

Irrespective of JSE sector classifications, is AVI's valuation drifting towards those of the retailers?

In that sense, perhaps it is still cheap against this benchmark? Or the retailers are in fact expensive?

Just some interesting thoughts...

• < Prev
• Next >