Here's the deal: You may read the information on the site for free. As and when I have the time I'll add new articles, taking into account any questions which have been asked. For legal reasons, please do not consider anything on this site to be advice - the only free investment advice is to apply your own mind. If you want to request that an article be written, then email me. I have limited time available, and will prioritise the work accordingly, so please be patient. Email me at invest@freeinvestmentadvice.org.

20 Feb 2014 : Sometimes you need a little luck. I mentioned that I hadn't traded in Accentuate because its fair value hadn't dropped into my buying range. Today they came out with a trading statement that said they expected EPS to be in the range 2.7c to 2.9c in the 6 months to 31 Dec 2013 - this would make it their worst first half in 3 years (typically they earn about 6c). Will be interesting to see what happened. An illiquid stock like this can easily overreact to bad news.

I bought a bit of Argent. I've been a bit sceptical about the extent of what they call once-offs in their accounts really are once offs. There are 2 things which have convinced me:

The ongoing purchase by directors of shares in Argent. All of the top 3 have been buying - Treve Hendry (CEO), Sue Cox (financial director) and T Scharrighuisen (Chairman). This represents a change of heart for Sue Cox, who sold a whack of Argent shares in September (at prices ranging from R5.55 to R5.65).
It was disclosed that Allan Gray now own 20% of Argent (they have a solid investment process, and have the resources to investigate these things far better than me).

Argent Industrial share analysis

About Argent

Argent has a self-proclaimed "bold approach to business and is always seeking new investments".

Manufacture of branded consumer goods sold locally & internationally.
The steel trading segment involves the trading of ferrous steel, stainless steel & aluminium to both external customers & the Argent group's manufacturing businesses. "This is a very competitive sector and the group's strategy is to supply as many value added products & services as possible, which includes cut-to-length, blanking, tube manufacture, flame cutting, etc..."

Argent is a steel-based beneficiation group operating through the following businesses in South Africa, the UK & North America:

South African Manufacturing

Atomic Office Equipment	Same products as Toolroom - based in CT.
Allan Maskew	Design & manufacturing of specialised industrial rubber mouldings since 1969. "Most technologicaly advanced rubber manufacturer in SA". Main customers are mining, automotive, HMV (Bell, John Deere), civil engineering
Barrier Angelucci
Castor & Ladder Jhb	Excalibur supplies the plastics, Allen Maskew the rubber & Phoenix the steel.
Cedar Paint	In FY2012 "secured the house brand paint supply for 3 large retail groups" (probably easily changed?), whilst its "own branded products are gaining significant market share"
Excalibur Vehicle Accessoriees	Buys aluminium from Hulett Aluminium, which it cuts to size, treats & sells. Niche aluminium manufacturer, e.g. supplies the aluminium high-line back bumpers, aluminium sidesteps for taxis. "90% market share". In FY2012 introduced new product lines that include school & hospital furniture, to take advantage of the government's committed expenditure in these areas, as well as pit latrine structures for the low-cost housing market. No export opportunity because of Hulett's high price levels.
Excalibur Vehicle Accessoriees	All Lite Steel Products was incorporated into Excalibur Vehicle Accessoies in July 2012. It is the "biggest automotive powder-coater in SA".
Hendor Mining Supplies	Buys steel from Phoenix, and manufactures mining scrapers for narrow-vein gold, platinum & chrome mines - the winch-powered scraper is a relatively short-life consumable that never returns to surface once taken underground. Manufactures screens for mines. "Dominant market player" (reported some time back that it has 60% of the SA market). Impacted by mine closures. "Though scrapers are exported to the Zambian Copperbelt, their bulk, low value and low technology render exports to potential South American markets unattractive".
Jetmaster	"A top brand in SA". Fireplaces manufactured, typically buys steel from Phoenix Steel, paint from Cedar Paint, pokers from Excalibur. Exports to Australia, New Zealand & UK. Argent owns the Jetmaster brand throughout the word, except in the EU & the UK.
Koch's Cut & Supply Steel Centre	Metal fabricator to industry in KZN.
Sentech Industries	High tech manufacturing facility. "Monopoly in EC"
Toolroom Services	Manufactures steel office furniture, steel kitchen cpuboards & retail shelving. "Dominant market position"
Tricks Wrought Iron Services
Xpanda Security	Purchased in 2005: Manufacturer of steel barrier security in - security doors, driveway security gates & burglar bars (also after-sales & back-up service). Activities are: (i) Do-it yourself. Burglar bars, security gates & trellis expander gates; sold in chain stores like Builders Warehouse, Dions & Mica Hardware. (ii) Shutters/roller doors, which are custom made & installed for security at businesses, retail stores, factories & firestations. (iii) Sales of security gates & burglar bars to property developers & townhouse complexes. (iv) Exporting to Australia, UK, France, Italy, Portugal, Canada, New Zealand, Mauritius, the Seychelles, Ghana, Holland, Nigeria & Uganda. Benefits from a weaker economy due to higher crime rates.

South African Steel Trading

Gammid

Trader in stainless steel & aluminium, biggest retailer of aluminium for Hulamin, a national distributor for Columbus SS.

Phoenix Steel

Buys large amounts of carbon steel, which it cuts to size & either:

trades on the open market
supplies to Argent operations

Steel is sold internally to Jetmaster, Giflo, Xpanda Excalibur & Toolroom Services. Steel is sold externally to small & medium-size customers. In 2008 reported that 37.5% of the steel (by volume) traded by Phoenix is sold internally to Argent's manufacturing businesses.

Specialised Steel Profiles

Traditionally a specialist steel importer, it has "taken over the full buying role of the Group’s steel, aluminium and stainless steel requirements, from both local and international sources". Strong international ties.

The importing of stainless steel and aluminium products remains crucial to the Group as local mills (Mittal, Columbus & Hulamin) have been forced to narrow their manufactured product ranges to remain profitable.

South African Steel Trading/Retail

The following are distributors of the Group's brands (margins in distribution are low):

Castor & Ladder KZN
Gammid Cape
Gammid George
Paint & Ladders Klerksdorp
Phoenix Steel Mpumalanga (also beneficiates steel)
Phoenix Steel Richards Bay (also beneficiates steel)

South African Construction

Argent Industrial Engineering
Megamix. Supplies concrete & cruched stone in the Wesern Cape, quarry in Villiersdorp. AltX Listing.

South African Properties

Argent believe in owning the properties on which the group companies operate.

Argent Industrial Investments
GHL Properties
Parlance Investments

UK Manufacturing

Cannock Gates & Burbage Iron Craft

US Manufacturing

New Joules Engineering North America. Manufactures rail retarders, & has maintenance contracts for all installations. Distributes automotive products from Giflo in the US.

Revenue Risks (incomplete)

Argent has a global sourcing policy, with raw material being sourced by locally & internationally.

Infrastructure projects impact on demand for steel.

Strike action.

Competitive Moat (incomplete)

Who has the lowest cost structure?	Argent claim in the 2012 annual report that they have a "low cost structure".
Brand strength?	Argent owns a mix of stronger & weaker brands, unfortunately it's not clear how much profit is emanating from each brand.
Cost of entry

Profitability

Profit (R'm)	Manufacturing	Steel trading	Steel trading / retail	Construction	Properties
6m to 30 Sep 2012	54	(3)	(3)	0	5
6m to 31 Mar 2012	32	7	(4)	2	1
6m to 30 Sep 2011	37	15	(10)	0	5

Manufacturing

Profit

Allan Maskew (rubber)

Barrier Angelucci (modifies & installs ATMs)

Cannock Gates & Babbage

Castor & Ladder

Cedar Paint

Automotive component manufacturers*

Hendor Mining Supplies

Jetmaster

Koch's Cut & Supply Centre

New Joules Engineering

Toolroom Services & Atomic Office Equipment

Tricks Wrought Iron Services

Xpanda Security

Operation locations

Gauteng

FS, KZN, Gauteng, EC, WC

North West, EC

Gauteng

KZN

Kansas City

WG, Gauteng

KZN

KZN, WC

6m to 30 Sep 2012

Both its suppliers & customers were hit by strikes.

Underperformed due to losing an ATM contract from a leading bank. 21 staff were retrenched as a cost of R0.6m

"Now distributing the Group's automotive parts & Jetmaster fire places throughout the UK".

Making inroads into Consumer Goods market. "Benefitted from SSP’s importing capabilities - can import certain components and products which it was previously unable to do due to volumetric constraints".

Continued to increase market share & mature.

Recorded a profit - "a marked improvement on previous poor results". Abnormally hit by the transport sector strike.

Severely impacted by platinum & gold strikes. Still very profitable though.

Slow combustion wood fireplace approved in UK, Australia & New Zealand. Product development focussing on overseas gas heating.

Complete top management overhaul. "Will be back to its traditional profitability levels by 31 March 2013".

Best 6 month period ever. "Currently sitting with a very impressive order book" (order into Turkmenistan). "Promising signs that significant business will result from presentations to Russian Railing Confederation".

Excellent turnover & strong margins. Order books are strong as entering "what is usually a very busy season".

Performing "in excess of all expectations". Diversified into steel pallets & man hole covers. Set up factories in PE, CPT & Ga-Rankuwa.

Best results in many years - both local & export. Increased presence in local retailers.

6m to 31 Mar 2012

Life 'n Leisure Umhlanga incorporated into Castor & Ladder KZN.

Giflo Engineering amalgamated under Excalibur brand (based in Ga-Rankuwa).

Jetmaster Cape closed (incorporated into Gammid Cape).

Jetmaster warehouse & factory combined into one operating facility in Roodepoort.

6m to 30 Sep 2011

Revenue picked up through new products. Benefits from its new cost-effective production techniques are expected to materialise in the next 6 months "via a vast improvement in gross margin."

Satisfactory results, expected to improve in 2nd half of financial year.

"Significantly increased its manufacturing capabilities & is tendering ona opportunities in SA & African banking environments"

Purchased Cannock Gates in UK for GBP400,000 on 30 Sep 2011 (some R5m at the then exchange rate). Markets mainly through the internet, specialising in the manufacture of steel & wood gates. Burbage Iron Craft is being merged with Cannock Gates.

Continues to develop new products & grow market share.

Revenue continues to growth & secured a supply line into Massmart. Was closed for 5 weeks as a results of strikes in Chemical Industry.

Sentech now breaking even. Excalibur & All Lite remain a challenge, with an overhead structure not in line with revenue achievement. Excalibur in process of retrenching 38 staff members.

An excellent 6 months, with sufficient orders to seem them through well into 2012.

Difficult 6 months, with depressed residential construction industry & because entire Jetmaster operation was recently relocated. Opened Life 'n Leisure shops in Canal Walk & Clearwater Mall (Gauteng).

Continues to perform solidly.

Performed in line with expectations. No new capital projects on immediate horizon, but maintenance work & parcel jobs are ensuring that results are strong.

Performing according to expectations & have full order books. New shelving range is selling well. Deep into planning phase to extend range.

Full order book & tendering on business which will allow it to expand its operations into Cape Town.

Performed well in both SA & export markets. SA market performance improved by huge success of launch of a fully framed DIY aluminium trellis door.

6m to 30 Sep 2010

Strong recovery in sales & profitability, due to the recovery in the transport & heavy earthmoving industries, and the company diversifying into the mining industry through the manufacture of the rubber & polyurethane screen panels.

Now fully integrated into the Group.

Retail sales trended upwards, but the industrial access market was under pressure. As aluminium prices increased, customers moved quickly to buy old stock at lower prices.

More than satisfactory results. Sucessfully launched new branding for domestic & industrial paints, & drove to recruit experienced professionals from the industry, led to substantially increasing market share.

Automotive business produced a net loss of R8.5m due to a poor order book & industry strikes. Decided to amalgamate Giflo Engineering & Excalibur Vehicle Accessories.

Excellent results in line with strong SA mining activity.

Local sales disappointed, but exports to Australia & New Zealand remain buoyant.

Continues to perform solidly

Decline in capital tenders due to a number of new railroad projects being placed on the backburner, but has a more than sufficient work load due to maintenance & replacement work.

Revenue is showing a return to previous levels.

Star performer. Exports to UK still at satisfactory levels. Full order book for both fabricated & palisade fencing. Grown market share for pallets. Performed strongly in supply of structure for sanitation industry & fencing & gates for cellular communication installations.

Performed very well throughout the economic downturn. Export sales have disappointed.

*Excalibur Vehicle Accessories & Sentech Industries

Steel trading

	Profit	Phoenix Steel (trades & beneficiates carbon steel products)	Gammid Trading (aluminium & stainless steel trader)	Specialist Steel Profiles
Operation locations		Gauteng, KZN	Gauteng	KZN
6m to 30 Sep 2012	(3)	Focussed on cost reduction "in a very depressed market".	"Difficult 6 months with both demand & pricing pressures". Results improving as a result of "global sourcing & entering niches with stringent quality requirements".	Take over the full buying role of the Group's steel, aluminium & stainless steel (both locally & internationally). Importing is crucial as local mills (Mittal, Columbus & Hulamin) have been forced to narrow their product ranges to remain profitable.
6m to 31 Mar 2012	7
6m to 30 Sep 2011	15	Performed impressively, except for Phoenix Steel Middelburg & Gauteng, which were under margin pressure. Heavily affected by the strike.	"Difficult 6 months with demand & pricing still being under pressure", but "an improvement on the previous 6 months". Heavily affected by the strike.

6m to 30 Sep 2010		"A very difficult 6 months with both market demand & prices being depressed." Steel margins have been showing signs of improvement of late. Made a decision to close Phoenix East London due to the demand for all products in this area remaining exceedingly poor.	Demand & pricing has been under pressure. A marked improvement in both margins & demand has been experienced over the last few months, & a much improved results is expected for the final 6 months of FY2011. Importing of stainless steel has opened up new markets.

6m to 30 Sep 2009		Very difficult 6 months with market demand & margins depressed, situation improving with steel prices & market demand increased.	Demand & pricing under pressure.

Steel trading/retail

This involves the distribution of the Group's brands (Phoenix Mpumalanga & Richards Bay also beneficiate steel). Margins in pure distribution are low.

	Profit	Gammid Cape	Gammid George	Castor & Ladder KZN	Paint & Ladders Klerksdorp	Phoenix Steel Mpumalanga	Phoenix Steel Richards Bay*	Argent Port Elizabeth
Operation locations		WC	George	KZN	North-West	Mpumalanga	KZN	-
6m to 30 Sep 2012	(3)	Unprofitable, recently been restructured to focus more on the steel, stainless steel & aluminium markets in the Western Cape.	These companies were profitable.					Closed, 71 people retrenched at a cost of R1m.
6m to 31 Mar 2012	(4)							Phoenix Steel East London closed & amalgamated with Argent PE.
6m to 30 Sep 2011	(10)

Construction

There is a construction segment in the Western Cape that supplies ready-mix concrete, and a stone quarry supplying crushed aggregate for the construction & road building industry.

	Profit	Megamix	Argent Industrial Engineering
Operation locations		WC	WC
6m to 30 Sep 2012	0	Order levels are higher for the 2nd half of the financial year, but the "outlook for the construction industry in the Western Cape remains conservative".
6m to 31 Mar 2012	2
6m to 30 Sep 2011	0	Performed surprisingly well on the revenue front, but with reduced margin that were "under substantial pressure". Margins have shown recent signs of improvement, but ""the outlook for the construction industry in the Western Cape remains conservative".

6m to 30 Sep 2010		Steady decline in profit, with sluggish construction industry. "The company has repositioned itself back into the low cost housing market, which has improved the order book."

Properties

	Profit	Argent Industrial Investments	GHL Properties	Parlance Investments
Operation locations		Gauteng, Mpumalanga & EC	Gauteng	KZN
6m to 30 Sep 2012	5	In process of selling properties formerly occupied by Argent Port Elizabeth (hopes to conclude sale in November 2012), revaluation surplus written back by R7m. Awaiting R17m proceeds from Jetmaster property sales, before 31 March 2013. Purchased a warehouse in Klerksdorp for R7m, for Paint & Ladders Klerksdorp. In process of extending a property in Benoni, to accommodate Allan Maskew, to take occupation in March 2013 (written back revaluation surplus of R2m). Revaluation surplus of R12m written back on property occupied by Phoenix Steel Gauteng (as surrounded by empty buildings).
6m to 31 Mar 2012	1
6m to 30 Sep 2011	5

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	6 months to 30 Sep 2013	6 months to 30 Sep 2012
Profit b/f tax	17	52
Loss on disposal of PPE	-	1
Impairment of PPE	1	-
Closure of Argent PE	-	1
Specialist Steel Profiles Forex loss	8	-
Barrier Angelucci closure/retrenchments	8	1
Excalibur Vehicle Accessories & Sentech discontinued product lines	20	-
Effects of country-wide strikes	7	-
Normalised Profit b/f tax*	61	54