Rolfes Hold­ings re­turns to growth

Finweek English Edition - - PRO PICK - The com­pany’s i nterim re­sults for the pe­riod end­ing De­cem­ber 2014 high­lighted t he f ol­low­ing salient fea­tures: Chemi cal Divi­sionR ev­enue growth

From a fam­ily-owned busi­ness in 1925, to an AltX list­ing in 2 0 0 7, this chem­i­cal man­u­fac­tur­ing busi­ness moved to the JSE’s main board in 2011 and now has a mar­ket cap in ex­cess of R400m.

While still re­garded as a small-cap counter, and there­fore per­haps be­ing a lit­tle more spec­u­la­tive in na­ture, the com­pany is achiev­ing growth and a rel­a­tive out­per­for­mance of even its larger sec­tor peers. • Rev­enue in­creased by 13.9% (R589.3m). • Ex­port rev­enue in­creased by 36.8%

(R119m). • Gross profit mar­gins im­proved to

23.2%. • Head­line earn­ings in­creased 16.1%. Industrial Agri­cul­tural Min­ing & wa­ter 15.40% 25.70%

42.50% The f i r st half ( H1) of t he 2015 re­port­ing pe­riod end­ing De­cem­ber 2014 high­lights a re­turn to growth for the com­pany, af­ter 2014 marked the f irst year in the pre­ced­ing five, that earn­ings growth wasn’t achieved. The earn­ings un­der­per­for­mance in 2014 fol­lowed a loss from dis­con­tin­ued op­er­a­tions, as well as the loss re­alised on the sale of fixed as­sets. The head­line earn­ings per share (fully di­luted) in the H1 re­sults (2015) now high­light a re­turn to the com­pany’s best his­toric level of in­terim earn­ings.

En­cour­ag­ingly, the com­pany has achieved rev­enue growth f rom al l its chem­i­cal di­vi­sions, namely the industrial, agri­cul­tural, min­ing and wa­ter man­u­fac­tur­ing op­er­a­tions. Gross profit has grown 23.6%, with mar­gins in­creas­ing to 23.2%, mainly at­trib­ut­able to the higher mar­gin wa­ter chem­i­cal busi­ness. Op­er­at­ing costs in gen­eral have in­creased, how­ever, this fol­lows fur­ther in­vest­ment into the rest of Africa and Eastern Euro­pean ju­ris­dic­tions.

The fur­ther in­ter­na­tional ex­pan­sion feeds i nto t he con­tin­ued growth prospects for the com­pany as it widens its dis­tri­bu­tion chan­nels and ca­pac­ity. The group’s di­ver­sif ica­tion into the rest of Africa and Europe as well as the ex­po­sure into the US is now start­ing to pro­vide a mean­ing­ful con­tri­bu­tion to rev­enue (more than 20%) and a wel­come hedge in an un­cer­tain global eco­nomic en­vi­ron­ment.

Trad­ing on a price-to-earn­ings ra­tio of just over 10 times, Rolfes ap­pears to of­fer a rel­a­tive dis­count within the chem­i­cals space (AECI 15 t i mes, Chem­Spec -3.47 times, Om­nia 13.4 times, Span­jaard 34 times). The share is de­liv­er­ing on growth at present, while of­fer­ing a healthy geo­graphic di­ver­sity, pro­vid­ing a re­duced de­pen­dence on the South African econ­omy which con­tin­ues to show slow­ing eco­nomic growth.

Rolfes Hold­ings of­fers a spec­u­la­tive ad­di­tion to an in­vest­ment port­fo­lio with a long-term time hori­zon, at what ap­pears to be a rel­a­tive dis­count in a mar­ket trad­ing at a his­toric pre­mium in terms of ba­sic val­u­a­tion met­rics.

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