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Director Trades on the JSE : 10 Dec 2013 |
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(Background reading : executive director transactions in shares)
10 Dec 2013. People like certainty, and struggle to interpret mixed messages. They love hearing the clear unambiguous signal from an analyst saying that "this stock is desperately undervalued and must be bought". However, in the real world, most of the time the market is getting the price of most shares more or less correct, and at least not incorrect enough to provide me with the margin of safety I demand, to make up for my inevitable miscalculations! So, a lot of the time I'll be giving mixed messages, saying that things look kinda good with a share, but not good enough for me to invest!
I mentioned last week that Guy Toms, Prescient's Chief Investment Officer, bought 167,044 shares in Prescient at R0.80 a share. Today he bought another R553k of Prescient shares at R0.81 and R0.82. The comfort factor of a company insider putting more skin in the game is certainly there, so I've been scouring the financials to see whether there's some value I'm missing.
Based on the last reported financials and the definite payment for Prescient Ireland, I guestimate that Prescient is trading a bit below fair value, but not a lot below. I found the following areas the most difficult to value:
the upcoming administration contract with RE:CM - although it's huge in terms of AuA, I'm guessing that it's not terribly lucrative.
the equity markets have gone up a bit since end September, although I think less so for a company like Prescient, which has not got a large portion invested in equity. I wrote to Prescient asking them to give me a ballpark figure for the amount of equity they have in their portfolios. They didn't give me the info, and this is where the playing field is so obviously not level, as insiders have full access to and knowledge of this information. Prescient had R60bn AuM of SA assets at 31 March 2013, and this had decreased to R58bn by 30 September 2013.
there is the probability of still getting a revenue share from the sale of Prescient Ireland, over the next 5 years.
IT services benefiting from the continued depreciation of the Rand.
It's also possible that there are deals which have gone down which I don't know about.
Whilst there is value in the share, the margin of safety isn't quite as big as what I'd like to see when I invest. I'm still in 2 minds on this one, and I'm going to continue keeping an eye on it.
I had a look to see what other analysts were thinking, and for once we're not far apart : "We feel the share is fairly valued and would recommend investors to hold their shares", said one broker note.
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