Could Nu-World per­haps be the bar­gain to watch of the year?

The Star Early Edition - - BUSI­NESS RE­PORT - Amelia Mor­gen­rood

NOT A COM­PANY that is talked about much. The share price gained 41 per­cent in the past 12 months, and the price/earn­ings ra­tio is still at only 5.9 times. Its his­tory dates back to 1946 when the com­pany be­gan man­u­fac­tur­ing elec­tri­cal wiring ac­ces­sories. By 1952 man­u­fac­tur­ing of small elec­tri­cal ap­pli­ances com­menced, and in 1980 Nu-World be­gan im­port­ing and dis­tribut­ing small elec­tri­cal ap­pli­ances. Nu-World Hold­ings Lim­ited listed on the Jo­han­nes­burg Stock Ex­change in 1987. It is one of South­ern Africa’s lead­ing play­ers in the sup­ply of “Branded Con­sumer Durables” to the re­tail sec­tor.

Nu-World is one of the largest im­porters of con­sumer elec­tron­ics in South­ern Africa, with their in­ter­na­tional brands of JVC and Tele­funken and in-house brand of NU-TEC. It is the lead­ing im­porter and ex­porter of small elec­tri­cal ap­pli­ances in South Africa. In ad­di­tion to con­sumer elec­tron­ics, Nu-World also im­ports and dis­trib­utes large ap­pli­ances for cook­ing, laun­dry and re­frig­er­a­tion, air-con­di­tion­ing, a range of fur­ni­ture as well as the Ca­sio range of watches and con­sumer elec­tron­ics.

Brand Names

Conti; Ideal; JVC; Pal­sonic; Prima One&Only; Tele­funken; Fenici; GoldAir: Ideas by Nu-World; Magic Line; Nu-Tec; Sun­beam; Ve­gas.

De­spite the rel­a­tively slow eco­nomic growth and weak­en­ing con­sumer de­mand in the lo­cal econ­omy, the South African op­er­a­tions showed strong pos­i­tive growth in both sales and prof­itabil­ity. Sales growth was achieved in all di­vi­sions.

They de­liv­ered strong re­sults for the half-year to Fe­bru­ary 2017 with top-line growth of 14 per­cent, and their bal­ance sheet re­mains strong with a debt:eq­uity ra­tio of 6.5 per­cent. The group’s ex­clu­sive lo­cal and in­ter­na­tional brands con­tinue to ex­pand with new ranges, de­signs, mod­i­fi­ca­tions, spec­i­fi­ca­tions and styles. Nu-World con­tin­ues to in­vest in the de­vel­op­ment of new mod­els and de­signs, to en­sure that their cus­tomers and con­sumers are af­forded the lat­est de­signs at af­ford­able prices.

Ad­di­tional mod­els and cat­e­gories were added in the con­sumer elec­tron­ics range dur­ing the last year and new af­ford­able re­tail price points were achieved. In the liquor di­vi­sion, in­ter­na­tional agen­cies were se­cured for ad­di­tional brands of whisky, gin and vod­kas. They ex­pe­ri­enced in­creased sales and prof­itabil­ity due to bet­ter stock­ing and plan­ning. In the small do­mes­tic ap­pli­ances busi­ness, they added ad­di­tional ranges in most cat­e­gories.

Off­shore op­er­a­tions

Turnover out­side SA ac­counts for ap­prox­i­mately 30 per­cent of turnover and in­ter­na­tional ex­pan­sion and di­ver­si­fi­ca­tion con­tin­ues to pro­vide ex­cit­ing av­enues of growth.

In Aus­tralia sales were marginally down in the last re­port­ing pe­riod, but the op­er­at­ing costs were re­duced, af­ford­ing stronger op­er­at­ing prof­its. They in­vested in new tech­nolo­gies and so­lu­tions which were re­quired specif­i­cally for the Aus­tralian and New Zealand mar­kets.

Nu-World man­aged to show growth in Africa, the Mid­dle East and Brazil, de­spite con­di­tions re­main­ing tough, es­pe­cially in the oil pro­duc­ing economies. Uruguay con­tin­ues to be a strong pres­ence in Latin Amer­ica. In­dia, Pak­istan and Sri Lanka are new ter­ri­to­ries en­tered in Jan­uary 2017. The huge pop­u­la­tion in ex­cess of 1.5 bil­lion peo­ple of­fer new mar­kets and lots of op­por­tu­ni­ties. They have ap­pointed sub-dis­trib­u­tors and ini­tial or­ders were re­ceived.

Ac­cord­ing to the 2016 an­nual re­port, im­prove­ments in strate­gic and op­er­a­tional plans are the fo­cus of man­age­ment to grow mar­ket share in the con­sumer elec­tron­ics and branded con­sumer durables sec­tors, both lo­cally and off­shore.

This, cou­pled with the ex­panded off­shore ter­ri­to­ries that the group trades in, should in­crease the con­tri­bu­tion from th­ese busi­nesses in fu­ture years. Cor­rec­tive ac­tion has been taken in the Aus­tralian op­er­a­tions to en­sure the re­turn to prof­itabil­ity. The group con­tin­ues to fo­cus its tar­get mar­ket on recog­nised in­ter­na­tional brands for con­sumer elec­tron­ics and con­sumer durables, both lo­cally and off­shore.

It doesn’t make sense that Nu-World trades at such low val­u­a­tion lev­els – even in the cur­rent eco­nomic en­vi­ron­ment.

Amelia Mor­gen­rood is PSG Wealth re­gional di­rec­tor.

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