How Crime Pays: Low-Tech Security Barriers Listing A First For JSE

How Crime Pays: Low-Tech Security Barriers Listing A First For JSE

South African security barrier firm Trellidor Holdings listed on the Johannesburg Stock Exchange Wednesday, the first in its category of dedicated low-tech security solutions to go public locally in a fast-growing sector of players with aspirations to expand in Africa.

Trellidor makes and distributes custom-made steel burglar bars for windows and doors — a relatively low-tech security solution in a sector that is growing increasingly high tech.

There are surprisingly few security-related companies on the JSE, which has about 400 companies listed, according to BusinessDayLive.

Fast-growing players in South African tracking technology include Cartrack Holdings, Allied Electronics Corp. and Mix Telematics — all JSE-listed, Reuters reports.

Cartrack, which listed in 2014, gained about 25 percent in the past six months, benefiting from demands by insurance companies that new car buyers install tracking equipment.

The physical barrier security market in South Africa is expected to grow due to power outages, a growing middle class and increasing crime, said Trellidor CEO Terry Dennison. In the rest of Africa, the market for security is accelerating due to urbanization and growing home and asset ownership.

Trellidor’s listing should appeal to retail investors. It offers a hedge against a rising crime rate, BusinessDayLive reported.

“People are willing to pay a premium for security and safety … and Trellidor feeds that niche,” said Keith McLachlan, a portfolio manager at Alpha Wealth.

South Africans are obsessed with home safety, according to Reuters. Home robberies there are up 5.2 percent, according to government figures in September.

Security firms keep generating new business in South Africa. Despite weak economic growth, consumers are buying new things they want to protect.

“We are essentially a non-discretionary type spend,” Dennison said. “When there is a need people will invest in security.”

In developed markets most of the security business is from corporate clients. In South Africa, private citizens account for as much as 90 percent of Trellidor’s clients, Dennison said, according to Reuters. The rest of Africa accounts for the remaining sales.

The company plans to use the cash it raised in the public offering to buy smaller companies in the sector and expand into the rest of Africa, Dennison told Reuters.

Most free-standing homes in middle class and upper-middle class suburbs have some sort of barrier security, but as more South Africans move into gated communities they want more aesthetically pleasing deterrents or more layers of security, Dennison said.

“We see significant growth potential from investments in the rest of the African continent, where the African market for security is also accelerating as a result of urbanisation and growing home and asset ownership,” Dennison said.

Anthony Clark, an analyst with Vunani Securities, said, “I like the space that Trellidor plays in; crime does pay and it’s an escalating problem.”