Monumentalist

Investment Analysis: ARAXI LIMITED (JSE: AXX) (Formerly Capital Appreciation Limited)

Date: 10 January 2026 Analyst: Gemini (Senior Equity Analyst) Current Price: 190 cents (R1.90) JSE Ticker: AXX

Step 1: Data Gathering & Source Verification

Reporting Periods Used:

Interim Results: Unaudited Interim Financial Results for the six months ended 30 September 2025 (Released 2 December 2025).
Annual Financial Statements: Integrated Annual Report for the year ended 31 March 2025 (Released July 2025 under the former name "Capital Appreciation Limited").
Recent SENS: Review of the Name Change Finalization (Oct 2025), Trading Statement (Nov 2025), and Interim Results (Dec 2025).

Source Documentation:

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R2.49 Billion | Small Cap. | | Dividend Yield (L12M) | ~6.3% | Gross Yield. Based on TTM payout of ~12.0 cents. (Final 2025: 7.50c + Interim 2026: 4.50c). The company has a consistent history of paying dividends despite its growth profile. | | Liquidity Check | Medium/Low | Average daily value traded is approx. R1.5m - R1.8m. While liquid for a small cap, this poses execution risk for large institutional blocks. Retail investors should use limit orders. | | P/E Ratio | ~10.7x | (Trailing 12 Months). Based on HEPS of ~17.7 cents. This is a relatively attractive multiple for a tech counter, trading at a discount to the broader software sector. | | NAV | N/A | Valued on Earnings (P/E) and EV/EBITDA. (Note: Tangible NAV per share is ~115c, meaning it trades at ~1.6x book value, reasonable for a high-ROE tech business). |

Step 3: Operational & Strategic Analysis

Business Overview Araxi (rebranded from Capital Appreciation in Oct 2025) is a B2B Financial Technology company. It operates two primary divisions:

Payments: Market leader in payment terminal maintenance and management (Dashpay). It earns revenue from terminal sales and recurring maintenance fees.
Software (Synthesis): A cloud and digital transformation consultancy. It is a premier AWS partner and builds banking apps/security solutions for major SA banks.

Performance Trend (Interim Sep 2025 vs Prior)

Resilient but Slowing Top Line: Revenue grew a modest 2.3% to R638m (restated). The slow growth reflects "low business confidence" and clients delaying capex.
Margins Holding: EBITDA margin improved slightly to 23.4% (from 23.0%), demonstrating excellent cost control in a tough environment.
Earnings Growth: Normalised HEPS grew 58% to 5.65 cents, but this figure is heavily distorted by prior period restatements. "As reported" HEPS was flat/up slightly (+1.8%).

Sector Context: Digital Transformation vs. Consumer Strain The SA Fintech sector is in a tug-of-war. On one side, the "Cash to Card" migration continues to drive terminal demand. On the other, high interest rates are crushing consumer discretionary spending, which reduces transaction volumes for Araxi's clients (banks/retailers) and leads to delayed IT project spending (affecting the Software division).

Step 4: The Verdict

Bull Case: The "Cash Cow" Tech Play Araxi is a rare find: a tech stock that pays a 6%+ dividend and has a fortress balance sheet (over R300 million in cash with no debt). The rebranding signals a fresh push for international expansion (using Synthesis's cloud expertise). Buying at a P/E of 10x is historically cheap for a company with this quality of earnings and cash conversion.

Bear Case: Concentration Risk The company is heavily reliant on a few large banking clients (e.g., Nedbank, Gov). If a major bank decides to insource its terminal management or switch software vendors, Araxi's revenue could collapse. Furthermore, the anaemic revenue growth (+2.3%) in the latest interims suggests the SA market is saturated, and they haven't yet proven they can scale significantly offshore.

Fair Value Estimate 210c - 230c (Based on a target P/E of 12x and its strong cash backing).

Final Rating: BUY Reasoning: The market is pricing Araxi like a low-growth industrial stock (10x P/E) rather than a high-quality fintech. The downside is protected by the massive cash pile (approx. 20% of market cap is cash) and the dividend yield. Any uptick in SA's economy (leading to more terminal sales) or successful offshore wins will drive a re-rating.