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ADCORP HOLDINGS LIMITED

ADR JSE Listed

Investment Analysis: Adcorp Holdings Limited (JSE: ADR)

Date: 10 January 2026 Share Price: ~R6.30 (630c) Analyst Role: Senior Equity Analyst, JSE

Step 1: Data Gathering & Source Verification

I have reviewed the most recent financial disclosures and SENS announcements. Adcorp follows a February financial year-end.

  • Interim Results: Reviewed the Unaudited Interim Financial Results for the six months ended 31 August 2025 (Released 30 October 2025).
  • Annual Financial Statements: Reviewed the Audited Consolidated Annual Financial Results for the year ended 28 February 2025 (Released 29 May 2025).
  • SENS Activity (L12M): Key announcements include the Interim Dividend Declaration (October 2025), dealing in securities by the Long-Term Incentive Plan (November/December 2025), and the Annual General Meeting results (July 2025).

Data Sources:

  • Interim Results (Oct 2025): https://www.adcorpgroup.com/wp-content/uploads/2025/10/FY2026_Unaudited_Adcorp_Group_Interim_Results.pdf
  • Annual Results (May 2025): https://www.adcorpgroup.com/investor-news/sens-announcements/summary-of-the-audited-consolidated-results-and-final-cash-dividend-declaration-for-the-year-ended-28-february-2025/

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R692 Million | Small-cap stock, currently trading deep in "value" territory. | | Dividend Yield (L12M) | ~11.9% | Exceptional. Total L12M dividend of 74.8 cents.


• Final FY25 (May '25): 50.0c


• Interim FY26 (Oct '25): 24.8c


The dividend is paid from income reserves and supported by a net cash position. | | Liquidity Check | Illiquid / High Risk | Average daily value traded is low (~R320k/day). The stock is thinly traded; entering or exiting large positions without moving the price is difficult. | | P/E Ratio | ~3.9x | Deep Value. Based on trailing Earnings Per Share. The market has priced the stock for distress, despite the company being profitable and cash-generative. | | Net Asset Value (NAV) | ~1,280 cents | Massive Discount. The stock trades at a ~51% DISCOUNT to NAV (Price 630c vs NAV ~1280c). You are buying net assets for roughly 50 cents on the Rand. | | Net Cash | R201.5 Million | The group has no gearing (net cash positive), which is a critical defensive buffer in the current high-interest-rate environment. |

Step 3: Operational & Strategic Analysis

Business Overview Adcorp is a workforce solutions provider operating in South Africa and Australia.

  • Contingent Staffing (Blue Collar): The volume driver (brands like BLU), providing temporary labor to logistics, manufacturing, and construction.
  • Professional Services (White Collar): Higher margin IT and nursing staff (brands like Charisma, Torque IT, Paracon).
  • Australia: A niche IT and professional staffing operation.

Performance Trend

  • Top Line Pressure: Revenue decreased 5.5% to R6.39 billion in the latest interims (Aug 2025). This reflects "commercial headwinds" and client caution regarding new hires.
  • Bottom Line Efficiency: Despite falling revenue, Operating Profit surged 70.7% to R72.2 million.
  • How? "Cost-out" strategies and restructuring are working. They are doing less business, but doing it more profitably (Gross Margin improved to 9.8%).

  • Transformation Costs: The prior period included one-off BEE costs (R25.6m) which did not repeat, optically boosting growth.

  • Working Capital: Days Sales Outstanding (DSO) deteriorated slightly to 40 days (from 35), leading to a cash outflow from working capital. This bears watching as it ties up cash.

Sector Context

  • Employment Cycle: The SA staffing sector is a levered play on GDP. When companies are scared (current state), they freeze permanent hiring but may use temporary staff. However, Adcorp's revenue drop suggests even temporary demand is soft.
  • Regulatory Environment: Labour laws in SA remain rigid, making Adcorp's "flexibility" offering valuable to corporate clients who want to avoid permanent staff liabilities.

Step 4: The Verdict

Bull Case (Why Buy): Free Cash Flow & Yield. You are buying a debt-free company for <4x earnings with a nearly 12% dividend yield. The market is pricing Adcorp as if it is going out of business, yet it just grew operating profit by 70%. The "self-help" story (cost cutting) has successfully offset the weak revenue environment. If the SA economy improves even marginally, the operating leverage will be explosive. The massive discount to NAV provides a margin of safety.

Bear Case (Why Sell): Shrinking Revenue & Illiquidity. You cannot cut costs to prosperity forever. Revenue declined 5.5%, signaling that the core business is shrinking in real terms. If volumes drop further, the fixed cost base will eventually eat into margins. The stock is highly illiquid—if sentiment turns, there are no buyers to exit to. The Australian division is also facing a slowdown.

Fair Value Estimate: R8.50 - R9.00 Implies a re-rating to a conservative 5.5x - 6.0x P/E, which is still cheap but acknowledges the lack of top-line growth.

Final Rating: BUY (AGGRESSIVE VALUE) This is a classic deep-value play. The dividend pays you handsomely to wait for the market to realize the company is not in distress.

AI Generated Analysis Last Updated: 2026-01-14