Long record of value and an interesting future too

f the market was a kinder place, then low-key consumer brands distributor Nu-World Holdings would be much more appreciated for its dependable track record since listing in the late 1980s — even if earnings in recent years have see-sawed.

Judging by the interim results

Ito end-February, the operating engine is still humming reassuringly. Cash flows churn nicely, the balance sheet is rock solid and there’s still a decent trading margin. Dividends have also flowed consistently over the decades, even if there might be cause to query the maintaining of a conservative dividend cover of more than three times.

But, as the company’s modest earnings multiple shows, the market is not completely enamoured with this Steady Eddie. Admittedly the consumer sector is under pressure with interest rates having been ratcheted up a tad, which will hamper Nu-World. Then again, demand is fairly reliable as the company does distribute largely essential household items — and not all of these can be deemed “big ticket” items. Interim turnover growth to end February was 5% — fairly sprightly under the circumstances. Bottom-line growth came courtesy of management’s skill in handling the brand portfolio, which is clearly evident in the improved 5,5% margin (previously 5,3%).

There’s not much forward looking comment on the interim numbers, but there’s nothing to suggest that full year earnings won’t come in around 380c/share (presuming margins don’t turn brittle in the second half if imported costs rise).

For value investors, there’s much to ponder at Nu-World. What will provide extra intrigue is that the company disclosed earlier this month that stalwart shareholder Old Mutual had cut its stake from 45,76% to 20,99%. This appears to have allowed a new influential shareholder to emerge in the form of Wild Rose Capital, which has taken a 15,5% stake. Unfortunately the mysterious Wild Rose is not an investment entity that rings too many bells in the market. Even a Google search provides not so much as a clue to the business or the identity of its prime movers.

But you have to be a “believer” in Nu-World’s potential in the longer term to snag a 15,5% stake (worth close to R85m) in one fell swoop.

Vunani Securities small to mid cap analyst Anthony Clark, one of the few professional market watchers to keep tabs on Nu-World, has debated whether the significant change in shareholding might trigger “outside corporate activity”.

He argued: “When a major and long-term institutional shareholders nearly halves their stake . . . they must have been aware or surmised that some form of possible value uplift might come from selling their stake to an outside party.” Clark may have a point, remembering Bidvest’s opportunistic snatching of Nu-World’s rival Amalgamated Appliances a few years ago.

Certainly Nu-World’s value