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Buildmax looks like an NAV play

The company reported a 13% increase in Tangible NAV from 284c per share to 323c per share.
Part of the thinking behind our new Moneyweb Trades section is to allow investors to have a look at the portfolios of some of the financial journalists on our teams and see some of our portfolios and our thinking behind them. 
One of the stocks which I have long been bullish on is JSE-listed contract mining group Buildmax which currently sees Brait holding around 40% and Coronation sitting on 30% of the issued share capital. The company was recapitalised a few years back and repositioned to take control of some of the contract mining opportunities on the continent. 
Unfortunately a global over-supply of coal and a string of labour issues in the South African mining sector have meant that while that while the company has improved operationally, there has been limited upside for the share price. 
That was until on 1 August 2014, the company had confirmed that it had received a non-binding expression of interest from a third party to acquire the entire issued share capital of Buildmax. Since then, the share price has rallied nearly 20% to trade at R2.40 per share. This puts it on a price to earnings multiple of around 7 times historical earnings, which appears undemanding.
The obvious question will be: “What offer will this potential buyer table?” 
While Net Asset Value (NAV) calculations always need to be taken with a pinch of salt, when Buildmax reported its full-year financial results to the end of February 2014, the company reported a 13% increase in Tangible NAV (TNAV) from 284c per share to 323c per share. 
This obviously represents a significant premium to where Buildmax presently trades. 
The next interesting calculation to consider is how much of the current Buildmax valuation is cash. If we assume that Buildmax has been cash-flow positive since reporting its full-year results, then at least 52c of the R2.40 is simply cash.
While I have been beating this Buildmax drum for a while now, I can’t believe that the likes of Brait and Coronation would be prepared to exit a cash-flow positive, profitable business at below its TNAV at a time when management has indicated that they see an upside in coal prices over the next 12 to 18 months. 
**Author holds shares in Buildmax 

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