It’s a ‘Buy’… at some point

Finweek English Edition - - INVESTMENT -

I’M STILL LARGELY bear­ish on the mar­ket in the near term and I’m pretty pleased that we are see­ing some­thing of a cor­rec­tion at the mo­ment. This just helps blow off some of the froth­i­ness that was mak­ing me wary.

Now, I am not a big fan of the re­tail­ers at the cur­rent lev­els, but I agree with By­ron Lot­ter from Ves­tact that Holdsport looks promis­ing. The com­pany owns Sports­mans Ware­house and Out­door Ware­house as well as a few niche brands that suit the South African con­sumer’s needs well.

Lot­ter reck­ons that Holdsport will earn R3.50 per share in the cur­rent year, which puts it on a price-to-earn­ings mul­ti­ple of 11.7 and with a div­i­dend yield of about 5% go­ing for­ward. That sounds in­ter­est­ing.

One of the main rea­sons I like Holdsport is that it is a cash re­tailer, so there is none of this non­sense of ques­tion­able credit books and bad debts crop­ping up down the line. It is also a fan­tas­tic play on the South African mid­dle class in the long run.

While it might not be that ex­cit­ing, it is hard to ar­gue against an in­vest­ment that gen­er­ates strong cash flows and whose div­i­dend is cur­rently beat­ing in­fla­tion. It is a sim­ple and clean busi­ness, and for that rea­son I would stick in a cheeky bid un­der the R40/share mark.

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