CMH shares jump 6%

SHARES in JSE-listed motor dealership and vehicle rental group CMH jumped more than 6% yesterday after the company said it expected impressive full-year results.

SHARES in JSE-listed motor dealership and vehicle rental group Combined Motor Holdings (CMH) jumped more than 6% yesterday after the company said it expected impressive full-year results to be announced later this month.

CMH posted stellar half-year results to August, when revenue surged 10% to just more than R4.3bn, while headline earnings per share rose 120% to 81.5c.

In a brief statement yesterday, the company said a “reasonable degree of certainty” existed that “the headline earnings per share and earnings per share for the year ended February 28 2013 will be 45%55% and 35%-45%, respectively, above the previously reported headline earnings per share and earnings per share for the year ended February 29 2012”.

The share surged up to 6.8% to R13.45 on the news.

In October last year, group financial director Stuart Jackson said CMH was able to raise its interim dividend 92% to 25c a share.

Absa investment analyst Chris Gilmour said the Stock Exchange News Service note was a “good trading result”. The company appeared to be “doing better than the Naamsa (National Association of Automobile Manufacturers of SA) numbers would suggest”.

“They’re probably gaining market share … with this kind of growth so far ahead of Naamsa.”

Mr Gilmour conceded that the CMH share was a “poor trader” but that it had “surprised on the upside for sometime”. He also speculated that CMH’s car rental business, First Rental, might have contributed to the growth, with the sector receiving a boost this year from the African Nations Cup held in SA. This also helped the company source good used vehicles, he said.

However, he said the “next six months might be much more illuminating, especially if you take out the rental market” as the “consumer is under increasing stress”.

Investment Solutions chief strategist Chris Hart warned that CMH had a history of being a cyclical business. “My suspicion is that they are at the high point of the current demand for vehicles,” he said.

“You only have to look back five years or so, when vehicle sales collapsed — it was pretty much a penny stock and was in a lot of trouble,” said Mr Hart. “The most recent data from the motor industry suggest sales have probably peaked”, and the country could face a possible decline in new vehicle sales.

Mr Hart said the question was “to what extent would CMH revert” to its historically cyclical trend.

He said his feeling was that interest rates, which would likely “stay low for some years”, would offer a “counter-cyclical effect” that would support CMH, and “help the company hold out” as sales of vehicles declined.

CMH financial director Stuart Jackson told Business Day yesterday he would only be able to comment once full-year results were published on April 22.