Thamsanqa Netha’s top three stock picks
Thamsanqa Netha, Managing Director at Shiloh Capital, recently shared his top three JSE stock picks: Stadio, Santova, and Stor-Age.
Shiloh Capital, a private investment firm, specialises in alternative investments, and Netha brings nearly two decades of experience in financial services to his role.
He holds a Master’s in Development Finance from Stellenbosch University and has previously worked at prominent institutions such as Nedbank and the Development Bank of Southern Africa, joining Shiloh Capital in 2015.
The JSE’s quarterly Stock Picks series, where Netha shared his selections, was created to engage retail investors and encourage their involvement in the stock exchange.
Increasing retail investor participation has become a core focus for the JSE as part of its strategy to revitalise the exchange by attracting smaller companies to list and remain listed.
Currently, small-cap stocks on the JSE face low liquidity, making them less appealing to large asset managers. Through these Stock Picks events, the JSE aims to showcase smaller-cap options and connect retail investors with investment experts.
In this latest event, which focussed on small-cap stocks, Netha’s picks spanned consumer services, industrials, and financials.
He explained that Shiloh Capital has investments in all of the companies he picked at the event.
This portfolio of picks focussed on balance, containing a growth stock, Stadio, a stable revenue earner, Santova, and a defensive stock, Stor-Age.
He also previously highlighted Santova at another stock pick event, where he praised its digital solutions in the logistics sector.
He said this helped the company grow despite challenges like fluctuating logistics demand, higher interest rates, and ongoing effects from the Covid-19 recovery.
His other stock pick, Stadio, is also similar to a previous pick of his, ADvTECH, which also operates in the private education space.
He explained that these three stocks are poised for growth and will provide great income for investors moving forward.
Below are Netha’s top three stock picks, Stadio, Santova, and Stor-Age.
Stadio
Netha’s first stock pick, Stadio, is a private higher education company in South Africa with a market cap of R5.51 billion.
He explained that this company prioritises two things: accessibility and affordability for tertiary education.
Originally a spin-off from PSG’s Curro, Stadio focuses exclusively on the tertiary level, targeting individuals who might not have the means or access to traditional university institutions.
This approach has aligned with the rising demand for higher education in South Africa, particularly in the tertiary sector.
In the last year, Stadio has shown strong growth: its share price has increased by 35%, revenue rose 16% to R1.4 billion, and net profit grew by 25%, reaching R28 million. The company’s investments in campus infrastructure and online education platforms have supported this growth, attracting more enrolments.
An interesting aspect of Stadio’s brand reach is its sponsorship of Craven Week, a rugby event with a young audience, allowing them to engage with aspiring professional players who may not be able to attend a traditional campus.
Stadio’s online programmes make it possible for these students to pursue their education remotely.
Stadio has a P/E ratio of 23, which Netha views as moderate compared to its peers, with further growth potential already factored into its valuation.
The company also pays a small dividend, with a yield of 1.5%, while reinvesting in campuses, acquisitions, and online offerings.
Netha believes Stadio’s focus on high-quality educators and infrastructure places it well for continued growth in accessible, affordable tertiary education – a vital need in South Africa.
Santova
Netha’s second stock pick, Santova, is a supply chain and logistics company with a market cap of R 908.77 million.
This company offers end-to-end solutions in warehousing, freight forwarding, and information management.
Santova has strengthened its market presence across South Africa, the UK, and parts of Asia, benefiting particularly from growth in eCommerce and data-driven logistics solutions.
Santova has shown steady growth in both revenue and profitability, investing in advanced technology to enhance its e-commerce capabilities.
This tech-driven approach, along with the company’s focus on rising volumes since the Covid-19 pandemic, has enabled it to manage increasing demand effectively, Netha explained.
The company’s robust digital infrastructure also supports its growth and adaptability in a fast-evolving logistics sector.
Valued with a P/E ratio of 8, Santova appears undervalued compared to global competitors. It is cost-efficient, maintaining a healthy balance sheet and strong earnings growth.
For investors looking for a value pick in logistics, Santova offers an attractive choice at a competitive valuation.
Stor-Age
Netha’s final stock pick was Stor-Age, the leading self-storage real estate investment trust (REIT) in South Africa, with operations in both South Africa and the UK and a market cap of R7.18 billion.
Known for its defensive nature, Stor-Age has proven resilient against economic downturns, focusing on quality long-term leases that align well with the REIT sector’s blend of growth and income potential.
Stor-Age benefits from recurring rental income, supported by high occupancy rates – an essential metric for its business model.
Its approach includes expanding into underserved locations and providing storage solutions in areas with little competition.
This growth strategy positions Stor-Age as a balanced choice for both income and growth investors, offering a 6% dividend yield.
In terms of valuation, Stor-Age is trading close to its net asset value, which suggests a fair valuation relative to its asset worth.
According to Netha, its portfolio strategy relies on stable, long-term leases, making it a strong option for those seeking a reliable, defensive small-cap stock with a promising future.
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