Still worth hitch­ing a ride on this share

Financial Mail - Investors Monthly - - Analysis -

Ad­mit­tedly the easy yards on Value Group have al­ready been made by pun­ters who snapped up shares in early Septem­ber last year when sen­ti­ment stalled af­ter an aw­ful in­terim trad­ing up­date.

The share price has revved back to 470c af­ter steer­ing south to 412c — the low­est level in al­most three years.

The ques­tion is whether it’s still worth get­ting a ticket to ride, or whether in­vestors might have missed the bus.

There’s lit­tle doubt — even with the markedly lower fuel costs that will come into play for the last three months of the cur­rent fi­nan­cial year — that earn­ings for the year to end-March will be markedly down on the 68c/share earned in the pre­vi­ous year.

In­terim earn­ings came in around 5c/share with Value’s op­er­at­ing mar­gins crunched from 7,4% to just 1,6% as fuel and labour costs es­ca­lated in a muted trad­ing en­vi­ron­ment where rev­enue was up only 4% to R985m. In­creased main­te­nance and sub­con­trac­tor costs added fur­ther drag to the bot­tom line.

Even though Value tra­di­tion­ally has a stronger sec­ond half, IM would re­gard it as a com­mend­able ef­fort if full-year earn­ings can push past 20c/share.

While the short-term prog­no­sis is not com­pelling, it’s worth re­mem­ber­ing that since

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