Argent Industrial Ltd (JSE:ART) Investment Case

July 17, 2023

Will this JSE small cap keep performing and live up to their potential? Lets investigate.

Argent, which derives from the Latin word Argentum meaning "white metal as bright as an Argent Moon," has certainly lived up to its name over the past five years, with a stock price performance of +250.47%. This translates to an annualized return of 28.5% over the five-year period. 

Will this JSE small cap keep performing and live up to their potential? Lets investigate.


Business operations

ART is divided into three main operating divisions: Manufacturing, Steel Trading, and Properties.


The group is primarily an industrial manufacturing company that produces branded consumer goods that are sold both locally and internationally. The branded goods are sold directly to the consumer through the group's extensive network of companies in all major South African cities, as well as in the UK and the US.

Steel trading:

The second largest category in the group and makes up a range of steel, aluminium and stainless-steel products. The group supply as many value added products and services as possible. Including cut-to-length, blanking, tube manufacture, flame cutting etc.  Steel products are also traded internally to the groups manufacturing businesses with the help of its own distribution centres.


The group also has a property portfolio, with seven properties worth R220 million. The group earns money by charging companies market-related rentals.


Key Financials

  • Ticker: JSE: ART
  • Share Price: 1500c
  • Market cap: R841.61m
  • Div Yield: 3%
  • P/E: 4.11
  • 52 Week Low: 1101c
  • 52 Week High: 1550c


Latest results (March 22)

  • Revenue: +23.7%
  • HEPS (Headline earnings per share): +55.5% (from 218c to 339c)
  • Net Asset Value (NAV) per share: Increased from 1910c to 2238c.
  • Debt/Equity ratio: 0.31 (March 21) to 0.4 (March 22)
  • Interest bearing debt + lease liabilities / equity (Gearing %): Decreased from 16.9% (March 21) to 14.4% (March 22)
  • Quick ratio: 2.7 (March 21) to 2.3 (March 22)
  • Return on shareholders equity (ROE): Increase from 11.5% (March 21) to 14.9% (March 22)




Revenue generation for the group occurs through the sale of manufactured goods and trading steel and steel-related products. Revenue increased by 23.7% from R1.965B to R2.433B, leading to a 45.45% increase in profit during the 2022 financial year. The Net Profit margin also increased from 6.7% (March 21) to 7.9% (March 22). Revenue split as below:

Business segments:

  • Manufacturing: 63.8%
  • Steel: 36%
  • Properties: 0.2%

Geographical segments:

  • South Africa: 75.18%
  • Rest of world: 24.8%


The group exceeded its objectives for the 2022 financial year by investing in stable, developed international markets. They also continued to grow its export markets, through efficiently sourcing commodities globally.



ARTs CEO, Treve Robert Hendry, has been with the group for more than 20 years. Argent developed a policy of returning 30% of its after-tax earnings to shareholders, either through dividends or share buybacks. The year ended March 22, the group has repurchased 3 311 467 shares at an average share price of R12.74 per share, costing a total of R42.1m. Most shares held in ART is held by retail investors (86.95%). The rest is held by directors (11.57%) and a share option scheme (1.48%).


Bullish factors

Adaptability: The group has managed to maintain margins through proactive cost management, product innovation and clever sourcing of resources.

High inflation environment: Products mainly based on security and DIY, which are always in demand. (We know the importance of security in South Africa)

Lower steel demand: Leading to reduction in steel prices, reducing input costs for manufacturing.

Exchange rate hedge: Having operations in the UK & US offers a Rand hedge to the company.

Valuations: Reflecting solid financials, trading below NAV and at a P/E of 4.


Bearish factors

De-industrialisation of South Africa: Manufacturing and capital expenditure declines are indicators of declining revenue and profitability for the group. Only diversification away from the South African market will mitigate this risk.

Political and labour instability: The growing risk of labour and political instability is forcing diversification to more geographical stable regions.

Steel demand: Fluctuation in market conditions can increase the demand for steel. Increasing the input cost of ARTs operations.



The well-diversified group has demonstrated consistent and resilient financial performance over the past few years, while simultaneously creating value for shareholders. As a result, ART is well-positioned to continue its growth into the future. Notably, the group's net asset value (NAV) is 2238c, significantly higher than its current share price of 1500c, which represents a 49% discount.

Investors should keep a close eye on ART, particularly with its annual results presentation scheduled for March 2023.

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