Jean Pierre Verster from Protea Capital Management chose Ferguson Plc as his stock pick of the day and Gerbrand Smit from NEFG Fund Managers chose AECI.
Verster said: “I’m going with a company listed in London called Ferguson — it’s a plumbing and HVAC (heating, ventilation and air-conditioning) company. Even though it is listed in London and you would think that they are exposed to the risks of Brexit, most of their profits are made from North America, so much so that they have now announced that they will unbundle their UK operations — Wolseley, which is very small in the context of the company.
“This made me realise that they are not exposed to the Brexit risk and indeed if there is a sharp weakening in the pound, which is the currency that their share price is nominated in, it will be positive because they make their profits in dollars.”
Smit said: “I’m going to go with a SA Inc company, AECI. They are not so much SA Inc anymore as they spread their wings over the last few years but I just think the PE multiple is too cheap. It is trading at about a 10 price-to-earnings ratio and if you look at the latest numbers that they brought out, they had growth and revenue and earnings of about 9%. With their restructuring they saved about R3m, which will reflect in the next set of numbers that are due to come out.
“I think you’re sitting with a company that will do brilliantly over the long term with a cheap entry point. You have a restructuring, earnings enhancer coming through in the next 6-12 months.”