Merits a better rating
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.