Caxton and CTP Publishers and Printers Limited [Part 1]

Is this small cap JSE publisher and printing business cheap as chips?

Caxton, trading under the ticker symbol CAT, is a JSE-listed publishing and print business with a market capitalisation R3.68 billion. 

Caxton & CTP Publishers and Printers has grown to become a major participant in the South African print media industry and also has an ever growing packaging industry presence. 

It is recognised as one of the largest regional and local newspaper publishers including its national daily newspaper The Citizen as well as a printer of books, magazines, newspapers and commercial print in South Africa. It has over the last 10 years increased its presence in the South African packaging market mainly focusing on paper and board substrates which includes labels, folding cartons, and bag-in-box products but also includes a flexible packaging operation in Cape Town. Approximately 4 400 people are employed by the group, and the group has 10 main manufacturing operations.

Caxton holds a 33.7% investment into Mpact and a 9.3% investment into Novus Holdings. Mpact is the largest paper and plastics packaging and recycling business in Southern Africa. Their integrated business model is uniquely focused on closing the loop in plastic and paper packaging. Mpact is listed on the JSE and trades under the MPT and has a market capitalization of R4.41 billion. Based on current market prices Caxton's investment into Mpact is worth R1.487b. Novus is a printing business based in Cape Town. Their core operations comprise an extensive network of specialised printing and manufacturing plants servicing customers across the continent. Business activities include amongst others print production of all medium to long run requirements of magazines, retail inserts, catalogues, books, newspapers, commercial and digital work, labels, educational materials and manufacturing of tissue products. Novus is listed on the JSE under the ticker symbol NVS and has a market capitalisation of R1.39 billion. Based on current market prices Caxtons 9.3% investment in Novus is worth R0.129 billion.

Caxton Market Cap: R3.68b

Cash on balance sheet: R1.724b

Mpact Investment: R1.487b

Novus Investment: R0.129b

Price of Core Business:   R340m

When we put this all together we can see that we are essentially only R340m for the core operational business of Caxton which certainly peaks my interest.

Caxtons core operational business operates through two primary segments, the first being printing, publishing and distribution and the second being packaging and stationery.

The printing, publishing and distribution division engages in newspaper printing, book and magazine printing as well as commercial printing. Caxton prints over 120 local newspaper titles. On the packaging and stationery front the business produces labels, folding cartons, litho laminates and flexible packaging products. Caxton packaging division serves the following industry sectors:

• Wine/spirits/Beer
• FMCG products
• Cigarette packaging
• Frozen food products
• Quick Service Restaurant
• Products

In the next part of this research report we will look at the operational performance of Caxton in the most recent financial year as well as key business risks and opportunities.