Fol­low direc­tors’ moves

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

THE DIREC­TORS of ARB Hold­ings, the Dur­ban-based dis­trib­u­tor of over­head ca­bles and trans­mis­sion sys­tems, have been qui­etly pick­ing shares of­fered on the JSE over the past few months. The Alan Burke Trust, in par­tic­u­lar, hasn’t hes­i­tated to buy at be­tween 140c and 180c/share. The cur­rent of­fer of a few shares at 200c is a nice op­por­tu­nity for in­vestors who like smaller mar­ket cap­i­tal­i­sa­tion shares.

ARB’s mar­ket value is cur­rently R470m, while the group’s cash is some­where in the re­gion of R100m to R150m. Though that’s an ex­cel­lent bal­ance sheet in the tough cur­rent eco­nomic cli­mate it’s also a lazy one that, it’s to be hoped, can in the fu­ture be used for takeovers in or­der to ac­cel­er­ate the group’s growth. In fact, By­ron Nich­les, for­merly of Bridge Cap­i­tal and a takeover spe­cial­ist, was re­cently ap­pointed CEO to de­velop such op­por­tu­ni­ties.

On the op­er­at­ing side it’s also go­ing much bet­ter with ARB than with, for ex­am­ple, Pow­ertech, a man­u­fac­turer of elec­tric ca­bles whose profit re­cently suf­fered con­sid­er­ably due to the ris­ing and fall­ing cop­per price.

For the six months to 28 Fe­bru­ary 2009, the group’s earn­ings weak­ened slightly to 19,23c as against 21,6c/share for the cor­re­spond­ing pe­riod last year. The main rea­son for that was the lev­el­ling off in its gross profit mar­gins be­cause the prices of most met­als fell dur­ing the pe­riod.

How­ever, the direc­tors aren’t at all con­cerned about their prospects, partly be­cause many of the com­pany’s clients will ben­e­fit con­sid­er­ably from Eskom’s ex­pan­sion pro­gramme over the next few years. And then, of course, there’s also the pos­si­bil­ity of a takeover or two with the large amount of cash avail­able.

It looks as if ARB will again earn about 48c/share for its full fi­nan­cial year to Au­gust 2009 and that a div­i­dend of 16c/share will be de­clared from that. At 200c, the share is trad­ing at a for­ward earn­ings mul­ti­ple of just over four times the profit and a div­i­dend yield of 8%. Its net tan­gi­ble as­set value is 180c/share. Not a bad buy for 200c.

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