Afrimat (AFT) is athat we have liked for a long time. In May last year we wrote an article in which we did a on its from a lengthy period of sideways movement. Unfortunately, the coronavirus made a nonsense of our predictions, but the underlying of this company have only improved since then and it now represents one of the best buying opportunities on the , in our opinion.
In its most recentfor the year to 29th February 2020 the company reported that it had reduced its to just 8,2% - which means that the company is virtually ungeared. It is also strongly cash-generative. Much of this good fortune is due to the rising iron ore price - which, in turn, is due to supply difficulties in Brazil where the coronavirus is interfering with production plus early signs that demand for iron in China is picking up.
The results also showed that the company had improved itsby a whopping 48,5% and that its profits were up almost 53%. Along with most of the mining , this company has been allowed to operate for most of the lockdown. The , Andries van Heerden, says that the lockdown has cost them about R70m which will obviously impact the first half results to August 2020.
As the South Africanbegins its recovery from the pandemic, the government is likely to boost infrastructure spending, especially on roads which will benefit Afrimat's industrial materials division. It will also probably get additional demand from other countries in Africa for the same reason.
The company is also looking to continue diversifying into other base minerals like manganese, chrome and coal. This will obviously diversify the company further and reduce its reliance on iron ore.
The pandemic took the Afrimat share back down to within thethat it has been in for the past four years, but we believe that the latent potential of this company has only increased and that the upside move will be all the stronger. Consider the :
You can see here the lengthy sideways pattern which developed as Afrimat shifted away from construction towards mining of base metals and minerals. This pattern was broken in mid-2019, but thatwas brought to an abrupt halt by the spread of the virus in 2020. The share has since come down to test the lower and is now in a recovery phase. We believe that following its excellent results it will move up to back above the upper before the end of this year.
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