When you think about growth industries, printing and publishing is unlikely the first to come to mind.
But there’s a little business headquartered in Accra, Ghana that’s proving that print remains home to plenty of profitable niches.
Founded in 1977 by Elizabeth Joyce Villars, Camelot Ghana specializes in security printing. The company prints stuff like bank cheques, ballot papers, boarding passes – pretty much any document that someone might be tempted to fake.
While an increasingly digitized world means that we have less paper in our lives with each passing year, the growing sophistication of counterfeiting schemes means that the demand for security printing remains strong.
Analysts forecast a 4.8% growth rate for the industry through 2022. And the developing world could see an even more rapid expansion as financial inclusion deepens.
Majestic Earnings Growth
Camelot Ghana is riding this wave. The company’s earnings surged 28% last year and pre-tax profit has grown for three consecutive years at an annualized rate of 52%.
The rapid earnings growth is due, in part, to CEO John Villars’ (Elizabeth’s son) decision to reduce the company’s debt burden.
Camelot paid off its interest-bearing borrowings in 2015 and hasn’t carried any long-term debt on its balance sheet ever since. As a result, finance charges, which took a 51% bite out of the company’s operating profit in 2014, have been reduced to a negligible amount.
Priced at a Pittance
The company’s board (which is still chaired by the elder Villars) gave a substantial portion of the increased earnings back to shareholders in the form of a 0.85 pesewa dividend last year.
A 2017 dividend is yet to be announced, but with earnings of more than GHS0.04, the odds that the dividend will be maintained or even increased are quite good.
If the dividend is held steady, the stock, which currently trades at just GHS0.11 per share will sport a dividend yield of 7.7% to go along with a price-earnings ratio of 2.6 and a price-to-book of 0.3.
You won’t find many stocks trading at a better price than that.
A Share! My Kingdom for a Share!
Alas, that brings us to the stock’s main drawback. It hardly trades. Less than 60,000 shares of Camelot traded hands all of last year for a total trade value of roughly GHS6,500.00 (about $1500.00).
That’s not going to be worth the effort for larger investors, but it might be worthwhile for local individuals with a patient, long-term approach. Bidding a small premium to the current market price might induce some existing shareholders into parting with their shares.
I believe investors who are successful in doing so can look forward to a princely return over the next five to ten years.
Disclosure: At time of publication, I did not hold a position in any stock mentioned above.
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