Investors in small-cap industrial group Torre Industrial should hold on the to their shares despite a fantastic 12-month return.
Over the past 12 months, Torre has risen from R2.80 per share to just above R5 as investors have bought into the growth story of the business. However some are now questioning whether the business can sustain these levels of growth.
“Full-year 2015 seems pretty secure. A stock to hold,” noted Vunani Securities small-cap analyst Anthony Clark on Twitter earlier on Tuesday.
This followed the release of interim results for the six months ended December 31 2014. The company reported a 257% increase in revenue, headline earnings per share of 14.4c and a surprise maiden dividend of 3.5c per share.
Management told shareholders: “The external environment remains challenging in South Africa and in the other parts of the continent where the group is operating. The group does not foresee any significant improvement in the trading environment in the short-term. However the stabilisation of the SA environment and further development in the group’s African business units should contribute to organic growth in earnings going forward.”
The group also indicated that it would be implementing a dividend cover of 4 times earnings and told shareholders: “The commencement of dividend payments is an indication of the confidence that the board has in the long term ability of the group to sustain earnings and free cash flow.”
Torre closed at R4.85 per share, unchanged on the day.