Not on the skids

Finweek English Edition - - Companies & markets - MICHAEL COUL­SON

UN­BUN­DLED FROM Tiger Wheels, Tiger Au­to­mo­tive was listed sep­a­rately in De­cem­ber 2006. Tiger Wheels, which owns man­u­fac­tur­ing op­er­a­tions in South Africa and Ger­many, re­mains listed and the two still have the same con­trol­ling share­hold­ers.

Well-known SA driver Ed­die Keizan used his purse from win­ning the For­mula 5000 cham­pi­onship to buy into the busi­ness in 1972. Ac­tive ever since, he re­tired as ex­ec­u­tive chair­man when the list­ings were split and is now non-ex­ec­u­tive chair­man. Bid­vest bought a 17% stake – since in­creased to 20% – in 2005.

There are now 35 owned and 14 fran­chised Tiger Wheel & Tyre out­lets in all ma­jor ar­eas of south­ern Africa, hold­ing a sig­nif­i­cant share of the re­place­ment pas­sen­ger tyre and wheel busi­ness. There are also whole­sale busi­nesses in Bri­tain and SA.

The prelist­ing state­ment dis­closed that rev­enue in­creased from R750m in the year to June 2004 to R954m in 2006. Over that pe­riod op­er­at­ing profit rose from R52,6m to R92,8m and head­line earn­ings per share from 62c to 104c. Though poor de­liv­er­ies of tyres from Ja­panese sup­plier Yoko­hama hit the whole­sale units, the in­terim to De­cem­ber re­ported rev­enue up 10% to R536m and HEPS up 15% to 61c – but cau­tioned that earn­ings gained from lower fi­nance and tax charges.

MD Keith Rivers says that while the sec­ond half is usu­ally less prof­itable, 12-month earn­ings should be “slightly” up, though mar­gins are be­ing squeezed by tough com­pe­ti­tion. Other ad­verse fac­tors in­clude the cost of open­ing new out­lets and a 16,5% anti-dump­ing duty on some Chi­nese im­ports.

On the other hand, Tiger Auto has R100m in cash and is con­fi­dent that SA’s bur­geon­ing ve­hi­cle pop­u­la­tion will en­sure steadily grow­ing de­mand.

Af­ter list­ing in early March the share traded in a range be­tween 1 300c and 1 450c. Dis­ap­point­ment with the in­terim pushed it down to 1 100c. It has since re­gained 60c and, with a mar­ket cap of R690m, is al­most as big as Tiger Wheels (R774m).

If HEPS grow by only 5% for the year, the for­ward price:earn­ings mul­ti­ple is only 10,5 times. With its strong cash po­si­tion, Tiger Auto should be able to pay rea­son­able div­i­dends. Neg­a­tive re­ac­tion to the in­terim fig­ures may have been over­done and it could be a good medium-term re­cov­ery prospect.

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