Labat Africa is a black owned and managed investment holding company with a history stretching back to 1995. The group was listed as one of the first BEE companies on the Johannesburg Stock Exchange (JSE) in 1999.

The group’s investment portfolio has a main focus on transport and logistics, including rail, road and associated engineering and electrical components for sale. Labat aims to be an investment operating company, with a goal of becoming one of the leading transport and logistics groups in South Africa.

The company’s main operating subsidiary is integrated circuit manufacturer South African Micro-Electronic Systems (SAMES). Labat is currently in discussions with several large logistics companies in order to buy into joint venture agreements, whilst also developing its own in-house logistics capacity. Labat shares are available to buy on the Venture Capital Market of the JSE. The company has a JSE market cap of R72.5 million, and Labat share price has been highly unstable on the bourse.

After voicing intentions to buy into the logistics sector, Labat announced a R560 million acquisition of the Reinhardt Transport Group and several smaller logistics companies in 2015. In 2016, the company then made a shock announcement that the deals had fallen through, causing Labat share price to plunge.

Currently, Labat’s only major investment lies in operating subsidiary SAMES. During the 2015 financial year, turnover within SAMES increased by 21%, and Labat recorded a R1.425 million comprehensive profit compared to a R12 million loss the previous year.

Financial data for the six months ended February 2016 showed further improvement with a profit of R7.3 million. This was largely due to a deferred tax asset of R8.4 million. SAMES has enjoyed some good improvements from a successful move to a production facility in China and upgrades to its product portfolio. Further improvements are being targeted through a five year development and capital investment programme which will increase revenue and profits. Labat believes that the prospects for SAMES are sound, with potential to grow performance through appropriate investment and marketing. In addition to talks with large logistics companies, Labat has said that it is pursuing several small logistics acquisitions, although these are at an early stage.

Investors were understandably furious at Labat’s announcement that the deal with Reinhardt had been cancelled. The deal was touted as a game changer andprompted many investors to buy Labat shares. The live online stocks chart shows that Labat share price rose sharply from below 15 cents at the beginning of 2015 to R1.50 by January 2016. After the deal fell through, the price plunged down to 28 cents by August 2016.

With these deals off the table, investors won’t have much confidence to buy Labat shares. It remains to be seen whether Labat can deliver on its promises of entering into meaningful ventures with large logistics companies. Only then will the company be considered a viable investment prospect for investors looking to buy the shares.

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