Marc Hasenfuss: Market Watch

business Xpanda, and I wonder how comfortably Trellidor would slot into acquisitive industrial conglomerations like Torre or Invicta.

I doubt either Torre or Invicta would be prepared to pay a double-digit earnings multiple price for Trellidor. In this regard it’s worth pointing out that Trellidor — which will list on an inferred trailing earnings multiple of 12 to 14 times — intends seeking out acquisitions of up to R100m based on earnings multiples of five to eight times.

Without factoring in any earnings-enhancing bolt-on acquisitions, I think Trellidor should manage revenues of around R340m-R350m in the 2016 financial year and post earnings of around 55c.

That would make for a decent dividend, noting the generous payout policy of 50% of profits after tax.

But if I’m reading correctly between the lines, Trellidor appears to have a few acquisition opportunities in the pipeline already.

The hitch, of course, is that the SA custom-made barrier security market sits at around 300 000 units sales worth R900m/year. Trellidor already holds a market share of 35% in the main urban centres in SA, but dominates outlying areas with a 50% share.

This suggests corporate activity locally might be limited to buying one (maybe two) specialised local players — unless Trellidor branches into complementary fields such as fencing or security lighting.

This situation reinforces Trellidor’s prelisting hints that Africa will provide the longterm growth impetus, as currently only 11% of sales stem from the rest of the continent. My gut tells me Africa could be a game changer if capital is smartly mobilised to bolster existing market share as well as to snag profitable traction in several new markets on the continent. It’s the African successes, I predict, that will prompt a few large industrial suitors to noisily rattle the company’s security gate.