Stock Watch - Stock Pick — Blue Label Telecoms and African Rainbow Capital
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Graeme Körner from Körner Perspective chose African Rainbow Capital as his stock pick of the day and Ashraf Mohamed from Arqaam Capital chose Blue Label Telecoms.
Körner said: "I'm being cautious and if you can buy investment companies at 30% plus discounts to NAV (net asset values) with underlying operating entities that could perform in a more favourable environment and African Rainbow has some businesses in there that are very disruptive and I think they have got some real-world assets as well. I understand that TymeBank has to get to two million plus before it gets profitable but I like it. There is lots of optionality in there, and cash, and some really good deal making ability - and when you look at the underlying portfolio there is a lot of other stuff in there."
Mohamed said: "Mine is a short on Blue Label Telecom, their share prices run very strongly, to me there is risk in terms of the maturity of the mobile industry so I see limited to negative growth for them in South Africa, Nigeria hasn't been such a great environment either and then of course you have the Cell C issue and Cell C will continue making losses so at the end of the day I think they're going to come out, and they're either going to need to do a rights issue or they're going to have to merge with a third party but they are under pressure in my view."
Körner said: "I'm being cautious and if you can buy investment companies at 30% plus discounts to NAV (net asset values) with underlying operating entities that could perform in a more favourable environment and African Rainbow has some businesses in there that are very disruptive and I think they have got some real-world assets as well. I understand that TymeBank has to get to two million plus before it gets profitable but I like it. There is lots of optionality in there, and cash, and some really good deal making ability - and when you look at the underlying portfolio there is a lot of other stuff in there."
Mohamed said: "Mine is a short on Blue Label Telecom, their share prices run very strongly, to me there is risk in terms of the maturity of the mobile industry so I see limited to negative growth for them in South Africa, Nigeria hasn't been such a great environment either and then of course you have the Cell C issue and Cell C will continue making losses so at the end of the day I think they're going to come out, and they're either going to need to do a rights issue or they're going to have to merge with a third party but they are under pressure in my view."
