BRANDCORP STRADDLING THE MARKET
IT’S NOW ALMOST 10 years since Brandcorp listed on the JSE through the old Bloch Ltd as an importer and distributor of branded and niche products. Within months the size of the group was doubled with the acquisition of the Matus hardware group, which now contributes about 60% of revenue and operating profit. There are now three divisions: Matus, Interbrand (leisure goods and accessories) and House & Home, which distributes a wide range of house & home products under numerous brand names.
In the six months to December, revenue rose by 23,5% to R555m and operating profit by 25,7% to R743m, though a higher charge for the fair value adjustment of forex contracts held the gain in HEPS to 12,2%, to 50,6c, taking the rolling total for the past 12 months to 130,6c. OPPORTUNITIES Unlike the rest of its peer group, which concentrates on either branded goods or building and allied supplies, Brandcorp straddles both sectors, giving some protection against a downturn in either. Having said that, at present both its markets appear to be showing strong growth. At a share price of R130, a historic p:e of almost 10 and prospective forward p:e well into single digits, the share doesn’t look expensive. RISKS Competition is intensifying in both the key markets, with some powerful new entrants making their presence felt. • Market cap is only just over R1bn, and trading volumes on the JSE are thin, so the share is unlikely to become an institutional favourite. At 22 600c, a forward p:e of 14 and yield of 3,3%, the share is vulnerable to either a profit setback or general share market weakness.