BCX is basically an IT services firm that is involved in systems integration. From what I can work out they do things like SAP installations, outsourcing of IT functions etc etc. They've got a number of blue chip clients like the mines, Sasol and some nice government contracts as well.The reason that they have stood out for analysts as a potential value play is their attractiveness as an acquisition target. They are one of the few SA listed tech companies that provide a strong dividend yield and they are operating on an undemanding PE ratio of less than 10 times historical earnings.
On top of this the share is trading at a deep discount to its Net Asset Value (NAV). Currently the share is trading around R3.60... NAV when the company recently reported was around R5.20... Definately meaningful.
Obviously NAV can be something of a moving target and the assets are only worth what somebody is prepared to pay for them, but I think this bears looking at closer...
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BCX is a company with a massive problem. 90% of their R4bn revenue stream is based on contracts with 15 companies. One contract with SASOL is valued at R2.2bn over 50 % of BCX's revenue. This contract is under threat because SASOL have decided to go out to open tender for this business. Losing all or a portion would be a major blow to BCX.
Thanks for the feedback... The question though is whether or not Sasol could absorb the disruption of changing such a key service provider?
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