Mer­its a bet­ter rat­ing

Finweek English Edition - - Companies & markets - MICHAEL COUL­SON

IN ONLY 20 YEARS since he ac­quired the run-down Su­per truck rental op­er­a­tion, Larry Lip­s­chitz has built up a di­ver­si­fied trans­port group. Ex­pan­sion has been both or­ganic and through ac­qui­si­tions, but the group for­tu­nately sold its stake in mi­cro-lender Unifer to Absa be­fore ma­jor prob­lems were dis­cov­ered in its lend­ing book.

In its first decade as a listed com­pany, be­tween 1997 and 2006, its fi­nan­cial year-end was 31 March un­til 2005 but it has now been changed to 30 June (its 2006 fig­ures are for 15 months). Un­bro­ken gains took turnover from R1,3bn to R12,4bn, head­line earn­ings per share from 39c to 134c and the an­nual div­i­dend from 11c to 40c. In the six months to 31 De­cem­ber, turnover in­creased from R4,8bn to R5,8bn and HEPS from 60c to 64c. Its mar­ket cap is now R5,1bn.

Sup­ply chain man­age­ment is now the big­gest di­vi­sion, con­tribut­ing R1,2bn rev­enue and R175m trad­ing profit in the latest six months, fol­lowed by fleet so­lu­tions (R580m rev­enue, R129m trad­ing profit), mo­tor deal­er­ships (R2,4bn; R79m) and re­tail sup­ply chain (R1,3bn; R66m), all of which were bet­ter than a year be­fore, though fleet so­lu­tions pushed up its trad­ing profit by barely 4%.

It op­er­ates in al­most 30 coun­tries, in Africa, the Mid­dle East, Aus­tralia, China and Bri­tain, though SA still pro­vides 80% of gross trad­ing profit.

That’s an en­vi­able record, yet while the mar­ket as a whole has been boom­ing, Su­per Group’s price peaked at around 1 340c/share as long ago as sec­ond half 2004. Over the past 12 months the trad­ing range was 1 300c to 890c, though at 1 250c it’s close to the top of that range.

Anal­y­sis (as al­ways) is ham­pered by the change in fi­nan­cial year, but Su­per Group says 2006 pro forma an­nu­alised HEPS were 115c. It’s look­ing to achieve real earn­ings growth in the sec­ond half, which sug­gests 12month HEPS should be of the or­der of at least 125c to 130c. That should al­low the 15-month div­i­dend of 40c at least to be main­tained for the shorter pe­riod.

On those pro­jec­tions, the for­ward price:earn­ings ra­tio is 10 or just un­der and the prospec­tive yield 3,2%. Those are sub­stan­tially be­low mar­ket av­er­age rat­ings. It’s not clear why the mar­ket is so neg­a­tive con­cern­ing Su­per Group, but on its record it surely mer­its a bet­ter rat­ing.

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