After owning shares for a little while, investors often get the itch to look for 'small-cap' stocks, something like a TPG Telecom Ltd (ASX: TPM) that could grow 600% in 10 years. Unfortunately, most small-caps are more workmanlike, and lack the potential of something like TPG.
These 3 shares fall into the latter category, but could still be worth a closer look, in my opinion:
Kina Securities Ltd (ASX: KSL)
This Papua New Guinean bank/wealth manager/stock broker is highly profitable business with a massive dividend that I have written about before. With the dynamics of the business (very high levels of deposits, ultra-low funding costs) and the industry (increased use of technology, improving access to financial services), Kina is worth a closer look and I have my eye on the company.
However, I am concerned that recent (very high) levels of profitability are not sustainable and so the company remains on my watch-list for the time being.
Thorn Group Ltd (ASX: TGA)
This Australian financial leasing business faces a lot of challenges. The recent introduction of a pricing cap, an unknown penalty from ASIC hanging over its head, and now a class action lawsuit have made the market very nervous about Thorn's prospects. As a result, it is priced at about 8 times earnings and pays a monster 8% (trailing) fully franked dividend, although this will get cut somewhat for the full year.
Not an investment for the risk-averse, I think Thorn is worth a closer look at today's price for investors who take a 5-year view.
Reject Shop Ltd (ASX: TRS)
This bargain-box retailer is in a tough competitive position, relying on price to attract customers, in a country that continues to slide convenience ever higher on the totem pole. Reject Shop also relies on parallel importing (buying identical products cheaper from overseas) which is a business model that is vulnerable to a weaker Australian dollar. However, shares are not expensive and pay an attractive 5% dividend that should prove sustainable.
I'd probably prefer to get a lower price (say 20% lower) to improve my chances of making a good investment, but I think Reject Shop looks interesting today.
