It’s a ‘Buy’… at some point
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.