Argent shows its mettle

There have been few classic 10-bagger stocks on the JSE in recent times. One mostly missed by many mainstream institutional investors is diversified industrials small cap Argent.

This stock — long favoured and recommended by IM — recently traded at a new 52-week and record high of R38.25. IM’s last review on Argent was October 2025 at R28.31 with a target price of R33. That has been attained and exceeded.

Back in 2019, the share was trading under 400c as management embarked on a major restructuring and value-unlock strategy. Low-margin assets were sold; cash was recycled into niche acquisitions, mostly in the UK; and a material share buyback was initiated. Since then Argent has delivered 15 consecutive periods of growth in headline earnings and NAV. Despite this, the share price remains at a modest forward earnings multiple of 6.9, based on IM forecasts.

After the heady run in the share price, is there more to come from Argent?

Year to date Argent’s share has risen 16% and over 12 months by 49%, with a market valuation now of R2bn. Those increases are well ahead of the JSE small cap index, which is flat year to date and up 20% in the past year.

For years, Argent traded at a material discount to NAV, currently at R36.55 a share. Today it’s trading at a premium as offshore buying interest in the counter has pushed the stock higher ahead of year-end results to March, due in late June. IM is also hearing whispers of new institutional interest. Perhaps Argent’s size and consistency have now drawn out the slide rules.

In its interim results to September 2025 Argent reported revenue up 12.4% to R1.26bn, with profit before tax increasing 12.5% to R197.5m. Importantly, 47% of revenue and 69% of profits were derived offshore as the overseas assets consistently showed solid growth. However, IM is cognisant of the volatility of the rand against Argent’s main pound sterling offshore currency earnings play.

Back in 2019, the share was trading under 400c as management embarked on a major restructuring and value-unlock strategy

The domestic operations, principally the steel assets, remain problematic, and IM believes Argent would look to exit many of its domestic assets, such as Gammid, Phoenix Steel, Megamix and Hendor Mining, should a suitable offer emerge.

For the year ended March IM expects conservative headline earnings growth of 9.5% to 540c a share and that the cash pile — R546m as of September 2025 (mostly offshore) — would have increased. Argent has also bought back 36% of its shares in issue over the years, with the last repurchase before the closed period. The company bought back 357,000 shares at R33 a share for about R12m and has approval to still buy 10.07-million shares, or 10.7% of outstanding shares.

In IM’s opinion, the rerating and value accretion have been driven by the consistency in Argent’s earnings alongside the offshore strategy and the benefits of the share buybacks.

CEO Treve Hendry has judiciously utilised cash to acquire offshore businesses. The last was Mersey Containers, a manufacturer of modular buildings such as offices, welfare facilities and storage solutions, for R159m in August 2024. Hendry has apparently been looking for new deals internationally, racking up the air miles.

IM also considers hidden value within Argent, notwithstanding the cash hoard equivalent to 27% of the current market valuation, or more than R10 a share.

IM is intrigued by Argent’s UK-based fuel storage, transport and refuelling subsidiaries, Fuel Proof, Fluid Transfer and FloFuel Support. With energy and fuel being topical and the sector being heavily regulated, the profitability of the units has risen to a third of the group’s operating profit.

It’s interesting to ponder what this inconspicuous fuel business would be worth if sold as a separate entity. It seems a choice private equity-type morsel. Any exit price would certainly not be on a lowly Argent-type earnings multiple valuation; such an exit could deliver proceeds for Argent near its own current market valuation.

Then there is the chatter that as Argent’s offshore interest becomes a dominant portion of earnings, there might be a concerted push for a listing on the London Alternative Investment Market — a more suitable home for what is increasingly becoming a UK- and EU-focused business.