Mea­sure your dreams…

Finweek English Edition - - Companies & Markets - VIC DE KLERK

IN­VICTA (mar­ket value: R1 800m) has in­formed in­vestors in a trad­ing up­date that its profit for the six months to 30 Septem­ber was be­tween 26% and 31% bet­ter than in the cor­re­spond­ing pe­riod last year. For the year to 31 March 2008, the group – which is par­tic­u­larly known for its agen­cies sup­ply­ing bear­ings to the in­dus­try – achieved earn­ings of 343c/share. Thanks to its lat­est re­port – with the news ev­ery­thing is still go­ing well – it’s not un­rea­son­able to pre­dict to­tal earn­ings of 400c/share for the full year to 31 March 2009.

In­victa’s shares are cur­rently trad­ing at 2300c, less than six times the ex­pected profit per share for the cur­rent year. It’s tra­di­tion­ally rather stingy with its div­i­dend and in­vestors shouldn’t ex­pect more than 40% of the profit or 160c as a cash dis­tri­bu­tion. The first two norms at which an un­listed com­pany can be val­ued (with In­victa as an ex­am­ple) are an earn­ings mul­ti­ple of 6 and a div­i­dend yield of around 7%.

For the year to March 2008, In­victa recorded turnover growth of 34% and its re­turn on eq­uity was a healthy 29%. Op­er­a­tional cash flow made 80% of the de­clared profit. Those are three fur­ther bench­marks by which an un­listed com­pany can be gauged. In­vestors and prospec­tive owner-busi­ness­men will find it dif­fi­cult – in fact, very dif­fi­cult – to com­ply with those five bench­marks.

Over the past year In­victa’s price fell from 3100c to the cur­rent 2300c/share, which is dirt cheap and bet­ter than any idea of quickly start­ing up a busi­ness or buy­ing one your­self. An­other ad­van­tage is that In­victa’s shares trade freely on the JSE and it has a good man­age­ment team, which does all the work. Some­times it’s bet­ter to buy some­one else’s busi­ness than live out your dreams of run­ning your own cof­fee shop.

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