SA’s top-performing stock for 2024 (so far) – Altron CEO Kapp explains why
Altron has been in a two-horse race with WeBuyCars for the title of the JSE's best-performing stock of the year. Both are the creations by entrepreneurs who kept them family controlled for much of the business's lives. After the release of interim results at the end of August, however, Altron has opened up some space, with the share price bump taking its year-to-date gain to 107%. CEO Werner Kapp talks to BizNews editor Alec Hogg about Altron's transformation.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here.
Watch here:
___STEADY_PAYWALL___
BizNews Reporter
Here's an overview of the recent interview between Werner Kapp, CEO of Altron, and Alec Hogg of BizNews. In this interview, Kapp discusses Altron's impressive growth and transformation, focusing on their platform strategy, investments in technology, and potential for continued profitability.
Overview of Werner Kapp's Interview on Altron's Growth
Altron's recent financial results have caught the market's attention, with a year-to-date stock increase of 107.8%. This boost has propelled Altron to the top of BizNews' year-to-date South African share performance tracker, alongside WeBuyCars. Kapp attributes Altron's success to a strong strategy, saying, "we've been executing in a fairly disciplined manner… to be the leading platform and IT services company." Reflecting on his initial arrival at Altron, Kapp noted he saw potential in the business that others hadn't yet recognized, and since joining two years ago, he has focused on making that potential evident to both customers and investors.
One of Altron's key assets, Netstar, is often compared to Cartrack, a business owned by Karoo and valued at around 30 billion Rand. In contrast, Altron's market value is only 8.5 billion Rand. Hogg raised the question of whether Netstar, which is subscription-based and serves nearly two million users, might be worth listing separately, a move that could unlock value similar to Cartrack's. While Kapp acknowledged the question is common, he indicated that the current strategy for Netstar and Altron Systems Integration prioritizes maximizing value across the portfolio. However, he did not rule out a separate listing in the future, stating, "if we feel that that will maximize more value for our shareholders…that is something that we would consider."
As Altron focuses on capital allocation, the company has strategically narrowed its focus to platform and IT services assets. Under Kapp's leadership, Altron has adopted a "federated" model that encourages entrepreneurial decision-making within each business unit while providing support at the group level in brand management, customer life cycle, and capital allocation. This structure, according to Kapp, allows each unit's managing director to maintain a "customer obsession," ensuring that decisions are made close to those they impact the most.
Kapp also highlighted significant investments in their core areas, particularly Netstar, with around 330 million Rand allocated as growth capital expenditure in recent results. Most of this investment went toward developing devices for the Netstar business, which aligns with Altron's emphasis on high-growth areas that can drive market share. Kapp emphasized that capital is first directed toward organic business growth, followed by potential platform ecosystem opportunities. One such platform investment is Altron's oncology solution, part of their HealthTech business. Partnering with a leading oncologist, Altron developed an app to help cancer patients and their families manage treatment cycles, including visits, medication, and follow-up appointments, easing both physical and emotional stress.
Altron's evolution
Describing Altron's evolution, Kapp explained their platform business model as subscription-based, scalable, and data-driven. This model has yielded high annuity income and strong margins as subscriber numbers have grown. The platform approach not only provides immediate revenue but also allows for network effects, opening the door for added services and generating valuable data that can be leveraged with artificial intelligence tools to enter new sectors. Altron's transformation from a heavy-industrial company to a modern, tech-focused entity started around 2016 and was accelerated by the impacts of the COVID-19 pandemic. Recent trends in AI and platform economics have further spurred this change, marking Altron's shift toward a data-centric and customer-focused growth trajectory.
Altron's digital business has been a standout in this transformation, consolidating its SME-focused FinTech efforts. By aligning services across a broader technology solution stack, Kapp notes they've been able to enhance customer value and drive growth. The focus on profitable revenue growth through annuity business positions Altron as a company with the potential for stable and predictable earnings, an appealing prospect for long-term investors.
Altron's medium-term guidance has recently been upgraded, with the company now targeting 1.15 billion Rand in profit from continuing operations by FY2026. These projections, Kapp said, reflect disciplined strategy execution and signal Altron's expectations for sustainable success. Key metrics, including a 60% dividend increase and a 50% increase in headline earnings per share, underscore the positive performance in Altron's core business and indicate strong growth potential. However, Kapp acknowledged the challenges of maintaining exponential growth, suggesting that current performance levels are Altron's new baseline.
As technology evolves rapidly, Kapp emphasized the importance of balancing short-term earnings with long-term investments, particularly in areas like Netstar's data services. The company sees potential growth in managed services and enterprise segments, areas where big data offerings can meet evolving market needs. Kapp pointed out the difficulty in projecting further than two to three years in the tech industry but expressed confidence that Altron's focus on the right investments could drive ongoing growth.
For investors, Kapp characterized Altron as a "growth stock" with long-term potential, appealing particularly to those interested in compound growth rates and scalable tech investments. At nearly 19 times its price-to-earnings ratio, Altron may appear expensive at present; however, Kapp suggested that investors who believe in Altron's potential for sustained 20% annual growth could find value in a long-term investment. He concluded by reiterating Altron's commitment to maximizing shareholder value through sustainable earnings and high-annuity business, strategies that provide the predictability needed for strategic growth investments.
Read also:
