In May we reported that the average Price/Earnings ratio of JSE-listed, small-capitalisation companies (which provides guidance for the valuation of South African SME’s) had declined significantly in the second half of the past decade due to the weakening state of the local economy and a myriad of other challenges faced by the country. COVID-19 further heightened risk-aversion which drove small-cap valuation multiples to rock-bottom levels.

By the close of business on Friday 4 December 2020, the JSE Allshare Index had reached a level of 59 419. This is significant as it eclipses the highest point achieved during this disastrous year. Following several announcements during November of major progress in developing a vaccine to combat the pandemic, the devastation on the JSE’s leading index has been reversed, but what does this mean for the smaller constituents of the JSE, and indeed, for the pricing of South African businesses in general… read more

Valuations of South African SME’s hit rock bottom
20/04/2020 - 30/04/2020

Crest Capital has tracked key pricing metrics of every company listed on the JSE since January 2010, including the smallest listed companies. With the erosion of confidence in the South African economy throughout most of the past decade, now exasperated by the fear and uncertainty related to COVID-19, the pricing of South African SME’s has plummeted to fresh lows.

We explore the decline in key pricing metrics, and hence, valuations of local SME’s in two articles, Part 1 dealing with the price performance observed during the past decade and Part 2 dealing with the impact on valuations of unfavourable developments in 2020, primarily relating to COVID-19.

Part 1: 2010 to 2019
Part 2: First quarter 2020
Micro Cap P/E ratio and Small Stock Discount

Have a look at this chart, which provides a useful indicator of key pricing metrics of South African SME’s and will be updated on a monthly basis.

Listen: Does your Client’s Business have Sufficient Value to be Rescued?

Business rescue is still relatively new to SA with direction being sought from the courts on a regular basis. Be cautious of both the entrepreneurial client who believes everything will be hunky-dory tomorrow as well as the opportunistic Business Rescue Practitioner (BRP) trawling the corporate landscape who may have limited rescue and turnaround more