The JSE’s 9 Fastest-Growing Companies

Fastest-growing companies on the JSE
Photo by RayMorris1

I confess.

I don’t give revenue growth enough respect.

If you’re anything like me, the top line of the income statement is something you take a quick glance at as you scan the page for earnings — the bottom line.

After all, it’s earnings that count, right?

There’s some truth to that statement. But determining a company’s true earnings involves making lots of judgement calls. The figure is easily manipulated.

That’s less true of revenue. A company with steadily growing revenue is probably capturing market share. It may or may not be terribly profitable (think Twitter or Amazon), but it’s becoming a force to be reckoned with, and, sooner or later, investors take notice.

Think about some of the world’s best-performing stocks. Apple, Disney, Starbucks. These companies didn’t excite the market by reducing their expenses. They did it by selling a great product to more and more people.

The Fastest-Growing Companies on the JSE

With that in mind, I thought it would be interesting to take a look at the Johannesburg Stock Exchange’s fastest-growing companies.

The nine companies listed below have all grown revenue at an average rate of 25% or more over the past five years.

But we’re not talking about “one-year wonders” here. These companies haven’t just grown quickly, they’ve done it consistently. Each one has increased its revenue by at least 10% each year.

Let’s count them down.

9. PSG Konsult (KST)
Annualized 5-Yr Revenue Growth: 25.4%
Price Change (YTD): 0.4%

An intense marketing effort is building this wealth manager into one of South Africa’s most recognizable financial brands. PSG styles itself as a one-stop shop for clients in search of everything from stockbroking to health insurance. Consumers have responded exceedingly well, which has rapidly grown the company’s assets under management.

PSG plans to continue to invest heavily in advertising in the year ahead. It will also build up its stable of unit trusts. The stock market, however, remains a bit circumspect. The company’s share price is down 7.6% since the shares listed on the JSE in June of last year.

8. Onelogix (OLG)
Annualized 5-Yr Revenue Growth: 26.0%
Price Change (5-Yr): 719.7%

Once a conglomerate that owned everything from magazine distribution to copy shops, Onelogix has sharpened its focus on the transport of vehicles and other freight across Southern Africa. The company has been consistently profitable and highly acquisitive, which helps to explain its eye-popping revenue growth.

Acquisitions remain key to Onelogix’s growth strategy. It recently sold off some non-core holdings and purchased a refrigerated trucking company. With the stock price up some 41% over the past year, investors appear generally bullish on the company’s prospects.

7. Aspen Pharmacare (APN)
Annualized 5-Yr Revenue Growth: 28.5%
Price Change (5-Yr): 380.5%

The revenue growth at this generic drug manufacturer is all the more remarkable considering it didn’t enjoy the benefit of expanding off of a small base. Through years of shrewd acquisitions, CEO Stephen Saad has built his Durban-based company into a $10 billion enterprise with a presence in 47 countries across the globe.

Aspen management hopes that its new portfolio of anti-coagulant drugs will be just what the doctor ordered to extend its +25% revenue growth streak. Judging by its trailing P/E ratio of 34, the market believes they’re making all the right moves.

6. Taste Holdings (TAS)
Annualized 5-Yr Revenue Growth: 33.7%
Price Change (5-Yr): 695.4%

Who knew that pizza, fish & chips, and diamond rings was a recipe for toothsome sales growth? CEO Carlo Gonzaga has cobbled together an assortment of fast food restaurants and jewelry shops that consistently posts huge revenue increases. It’s rumored that he eats his own cooking, too, having personally visited nearly all the restaurants in Taste’s rapidly expanding footprint.

Looking forward, the jewel in the company’s crown is the rights to establish Domino’s Pizza’s presence in Southern Africa. Management will rely on the expansion of this franchise and acquisitions funded by its R200 million cash pile to feed future sales growth.

5. Coronation Fund Managers (CML)
Annualized 5-Yr Revenue Growth: 41.5%
Price Change (5-Yr): 973.8%

When it comes to asset management, nothing breeds success like success, and Coronation has had success in spades. The firm’s patient portfolio managers, backed by top-notch researchers and analysts, boast impressive track records across the board and now oversee some $52 billion worth of client assets.

As Coronation grows, it will be tougher to produce consistent earnings growth north of 40%. But even in tough market environments (and perhaps especially in tough markets), investors want a proven hand to manage their wealth. I expect the company’s growth to be as strong as its enviable reputation.

4. EOH Holdings (EOH)
Annualized 5-Yr Revenue Growth: 42.3%
Price Change (5-Yr): 1278.7%

Perhaps surprisingly, EOH is the lone information technology firm on this list. The company, which was the best performing stock on the JSE in 2013, sells enterprise level software and hardware and provides lots of smart people with the know-how to get it up and running. With a roster of technology partners that includes Microsoft, Oracle, SAP, HP, and Cisco, EOH doesn’t need to do much to convince Africa’s leading businesses that it can provide whatever tech solutions they need.

A serial acquirer, it has made three major purchases in the past six months. Yet, organic growth still accounts for the majority of the company’s ballooning sales figures. In coming years, expect EOH to consolidate its African presence, which already extends to an impressive 22 countries.

3. Capitec Bank Holdings (CPI)
Annualized 5-Yr Revenue Growth: 43.6%
Price Change (5-Yr): 439.9%

The straight-laced world of banking is hardly the place you’d expect to find a company with one of the JSE’s most blistering growth rates. But by offering accessible and affordable banking services to low-income South Africans, Stellenbosch-based Capitec has, in its short 14-year history, expanded to a size that now rivals the likes of Nedbank and Firstrand.

The bank opened 39 new branches and installed 500 new ATMs over the past year, which has helped it to add roughly 100,000 new customers every month. Over the next few years, management believes enhanced mobile and internet banking platforms will help to maintain the steep growth trajectory.

2. Curro Holdings (COH)
Annualized 5-Yr Revenue Growth: 83.6%
Price Change (3-Yr): 323.6%

South Africa’s education system ranks among the world’s worst, which makes it fertile ground for private schools. Established in a church building in 1998 with just 28 students, Curro now operates 42 schools for pupils whose age ranges from three months to 18-years.

The company’s meteoric growth surprised even its own managers, and it is now five years ahead of the ambitious targets laid out in its 2011 IPO prospectus. But don’t expect it to rest on its laurels. The company has proposed its fifth rights issue in as many years which should leave it flush with cash to meet its new goal — 80 schools by 2020. With a triple-digit PE ratio, the market evidently loves its odds of success.

1. Keaton Energy Holdings (KEH)
Annualized 5-Yr Revenue Growth: 202.4%
Price Change (5-Yr): -71.3%

The JSE’s fastest-growing company derives its income, perhaps ironically, from digging in the dirt. Founded in 2007, Keaton operates two coal mines that fuel power plants owned by the troubled national electric utility, Eskom, and provide anthracite for export to locales as distant as Brazil.

Unfortunately for Keaton shareholders, razor thin profit margins have prevented the share price from mirroring the company’s triple-digit revenue growth rate. The stock is down 34% over the past 12 months. Management hopes that a recently acquired third colliery will boost profitability when it goes into production next year.

It’s Your Turn

Did any of the companies on this list surprise you? Were there any surprising omissions? What companies do you think will grow sales at a 25% pace over the next five years? Let’s hear your thoughts in the comments!

Disclosure: I have a beneficial interest in shares of Onelogix and Taste Holdings.

Related Reading

How to Invest on the Johannesburg Stock Exchange
5 Hot JSE Stocks That Even a Value Investor Can Love

24 thoughts on “The JSE’s 9 Fastest-Growing Companies”

  1. Great list of fast growing companies no dispute about that. I currently have 11 holdings in my portfolio. I started investing 5 months ago. Coronation Fund is one of them. Although it has a faily high price-to-book ratio its net earnings growth is much higher and it has a very high dividend yield. Its ratio comes out with a good 3.30. Plus its dividend payments has increase well over the last five years. I really like the stock. Nedbank is still better with an annual dividend payment in 2014 of R9.00, its share price much cheaper than Capitec also.

  2. I figured if I’m going to pay R400 and plus to buy one share in Capitec I might as well for the same price buy a stock whose dividends are much higher and consistently increasing also like Sasol that’s now in my portfolio also. I like the stock its return on equity is high which tells me the management is returning investors capital well. I do welcome a bear market anytime. My rifle has been reloaded I’m ready to buy.

  3. Keaton interesting given stock price drop, but big questions about Asian demand for coal (versus natural gas) and whether new electricity production will come online in SA. Interesting list, thanks.

    1. Thanks, Bill. Situations like the one Keaton finds itself in are a big reason why I tend to avoid commodity stocks. They’re at the mercy of so many factors beyond their control.

  4. A value investor doesn’t care about any given event. Factors that can influence market outcomes when he has a piece in a wonderful business. The more share prices drop the better. The Intelligent Investor great practical advice. Aspen Pharmacare is a great company and will soon take a spot in my portfolio also.

    1. Good day Mr Andre do forgive my disturbance.I saw you have a vast knowledge when it comes to investment I just wanna know how can one purchase these shares as a south african citizen? Thank you

  5. Hi Ryan. I was recently presented with the investment called Xchange investments from JSE from which I was advised to register for R18 200,00 for the software so that I can be able to buy or sell shares as I monitor daily using the software. I need to know how true is this and if its not a scam?

    1. Hi Mamosa,

      I’m not familiar with Xchange Investments, but I must say that R18 200,00 for trading software sounds very, very expensive. And I can see no reason why a beginning investor should ever need to pay for trading software. In my view, the best way to make money on the stock market is to buy shares of a good company at a good price and hold on to them for the long-term. Trading on a daily basis is a quick way to lose lots of your hard-earned cash.

  6. Hi Ryan, I’m not familiar with investing. I recently went to a presentation where they taught how to make money by buying shares and bonds. I need to know how do I go about starting to invest and buy shares. And which are the best companies that I should consider buying. Please help me. I need to do this.

    1. Hi Sfundo,

      Great that you’d like to begin the journey to become an investor!

      I’ve just published a post on the very first steps that every prospective investor should take before buying shares. You can read it here:

      https://investinginafrica.net/heres-where-you-start/

      After you’ve read it, let me know if you have questions or if you’re ready to move on to the next step.

  7. Hi Ry,plz help I need to trade and invest in JSE through software but don’t know how much i must have and how to get it at an affordable price coz iv heard that at JSE i can get it at less than R10 000.00 but not sure how true is that plz help Ryan.

    1. Hi Sibu,

      It’s true that you can invest on the JSE for as little as R10,000.00. Note that there is no need to buy software to trade on the JSE. The only requirement is to open a trading account with an a broker. One of my favorite online brokers is EasyEquities (www.easyequities.co.za). As a beginner, I would start by buying the Satrix Divi Plus ETF and then, after becoming more comfortable with the investment process, diversifying into shares of specific companies.

      Hope this helps and happy investing!
      Ryan

  8. Hi, Ray I am also new in this investing in shares thing and I am so interest but not sure about anything in terms of which broker is suitable for me and in mind considering shopbrite shares I plz need our advice

    1. Hi Tiny,

      I’m happy to hear about your interest in investing in shares.

      As you know, the first thing you will need to do is open a brokerage account. My favorite online broker at the moment is http://www.easyequities.co.za. They have a tax-free savings account that allows you to invest in any South African share. Just click on the box in the upper right-hand corner to register.

      You will not be charged anything to register, but you will need to deposit funds when you are ready to invest. When you buy shares, EasyEquities will charge a small commission fee (0.25%). So, for example, if you buy R1000 worth of Shoprite shares, you will be charged a commission of R2,50.

      The benefits of investing in shares are that they effectively give you partial ownership in a company. So, if you own Shoprite shares, you own a tiny little piece of Shoprite. Therefore, if Shoprite’s business performs well over time, the value of your shares will most likely rise and they may pay you a small dividend once or twice per year. You can then sell your shares when you need the funds for some other purpose or to buy shares of a different company.

      Because the value of shares can go up AND down, I advise that you only invest money that you can afford to lose. And, to start out, invest in companies that you know well. If you like shopping at Foschini, for example, consider buying shares of the company. If you’d like more specific ideas, I publish a monthly newsletter where I reveal my favorite shares. You can read more about it here.

      Hope this helps and let me know if you have any questions!

      1. Hi Ray

        Thanks for the advice its becoming clear to me know, I would also like to hear your take on buying international shares on companies e.g BMW or Steinhoff International Holdings at the moment when our South African rand is so poor at the moment.

        1. That’s not a bad idea. Buying companies that export goods or generate a substantial amount of revenue outside of SA tend to benefit from a weak rand.

  9. Hey I want to buy shares but I don’t know where should I buy them which I can use about R1000 on them

    1. Hi Moeketsi,

      To buy shares you will need to open an account with a stockbroker. One of my favorite JSE stockbrokers at the moment is Easy Equities (www.easyequities.co.za). They’re perfect for people who would like to begin investing with R1000.

  10. Hi

    I’m currently reading books about Forex trading…I want to trade in currencies. I don’t want to buy shares but I would like more guidance in regards to Forex trading. Kindly please assist where you can.

    Regards
    Val.

    1. Hi Val,

      I don’t do any currency trading due to its high risk and high fees. Sorry I can’t be of more help!

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