Timber Plantation. Picture: ISTOCK
Timber Plantation. Picture: ISTOCK

TWK Investments’s share price jumped 5.26% to settle at R13 on Monday, as the 77-year old agricultural group made its debut on the new exchange, ZAR X.

TWK Investments CEO André Myburgh said he hoped the listing would improve interest and liquidity in the share, which was trading at a 50% discount to net asset value. Independent analyst Mark Ingham said the business was attractively valued and prudently managed. "It has also moved with the times and diversified," Ingham said.

TWK provides products and services to the agricultural community, from timber plantation management and grain storage to finance, insurance and motor vehicle sales.

It is the second agricultural co-operative to list on ZAR X, joining Senwes, which listed in February. Zeder’s Kaap Agri will be separately listed on the JSE in 2017.

These listings give investors the opportunity to gain exposure to primary agriculture as an asset class. In the case of Senwes and TWK, they also indicate the emergence of interesting opportunities as companies that traded over the counter migrate to regulated exchanges.

TWK’s listing was a migration from an over-the-counter platform to a licensed exchange and did not entail the issuing of new securities. With just more than 700 shareholders and 35.1-million shares in issue, TWK Investments is majority owned by TWK Agricultural Holdings.

The Vumbuka Trust, a broad-based black economic empowerment trust, holds 25% of TWK Agri, which houses the group’s main businesses, holding 75% of TWK Investments.

Just more than 18,000 shares changed hands on Monday across 17 deals, at a total value of R232,160.

With a market capitalisation of R456m, TWK is trading on a price:earnings multiple of four. Its net asset value at August 31 2016 was R874m.

The share was trading at a significant discount to its net asset value and it would cost a lot more than R900m to replace the business, Ingham said. "It is undervalued in relation to its replacement value."

Earnings per share for the year to August rose 45% on the previous period’s to 339c. Revenue grew 23% to R6.5bn, with profit before tax climbing 39% to R158.7m. The board declared a final dividend of 44c per share, which at Monday’s share price suggests a dividend yield of about 3.4%.

Growth in revenue and profit was likely to continue, said chief financial officer Eddie Fivaz.

The agricultural sector would grow in importance, Ingham said. While an uncertain political environment did pose risks, South African farmers’ best years could still lie ahead of them, he said.

TWK Investments would consider a capital raise to fund bolt-on acquisitions that complemented its existing businesses, Myburgh said.

ZAR X CEO Etienne Nel earlier said that the exchange would announce a number of listings in the coming weeks.

It had signed up five stockbrokers, with five more set to join, he said.

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