Nothing arbitrary about this one
A QUICK GLANCE at ARB’s share performance over the past 12 months and it’s hard to believe its awesomeness has been ignored by so many of the big asset management firms. Its price increased from 180c to 305c/share as the mining industry began staging its comeback. And the good news keeps on coming: this electrical cable supplier carries copper cables inventory and with the current copper rally this usually long-term buy has become a sweet little something right now.
The reasons analysts like the share for the long term include its solid balance sheet (around 40% of its market cap is covered by its net cash balance) and a decent historic dividend yield of 4,8%. Also, ARB’s been around for a good 30 years polishing its industrial wholesaling business model. The fact that it’s exposed to the construction industry and its lumpy earnings cycles – plus the volatility in the copper rand price – has Standard Bank securities and PSG Online punting it as a long-term investment. ARB’s suppliers are diverse enough to have shielded it from the downturn in the construction sector, and management believes Telkom and other Government infrastructure spending will continue until the private sector picks up again.
Another reason Finweek is super excited about the share is its recent change in dividend policy, announced in last year’s annual results for the year to end-June. It’s hard enough finding a small cap stock exposed to the construction sector not contemplating rights issues to stay afloat,