HUDACO Share price: R114,45 JSE code: HDC

BUY

HUDACO HAS POWERED

through the low commodity prices and mining tempest in style. That’s shown in interim results (to end-May) where, despite being battered earlier, key numbers are sound. The market has recognised this. Though the share price was up a lacklustre 9,5% over the past year, it has surged ahead in the year to date by 18,7%.

That makes the share appear expensive. Ignoring the historical nonsense PE ratio of 117 times, the forward PE, based on the results, should come out at around 11 times. That makes investment sense and is why Hudaco is worth buying.

But there is some risk. Hudaco has been clever at diversifying away from problem areas through acquisitions, but it still has considerable exposure to mining and manufacturing. Both these industries are largely outside the control of Hudaco and they could slow results for the full year.

CE Graham Dunford is likely to continue with acquisitions but Hudaco cannot completely escape mining and manufacturing. And the industries, especially mining, are notoriously difficult to call.

But on the flip side a recovery in mining, of which there has been some evidence at individual mines, would provide the boost to keep Hudaco ahead of competitors in the industrial engineering sector.

Two points stand out in the interims.

Cash flow increased by an incredible 190% to R328m, a trend that can be maintained as Hudaco has several cash-generative businesses.

And the dividend payment was up 16% to 180c, another reason to buy the share.