HU­DACO Share price: R114,45 JSE code: HDC

Financial Mail - Investors Monthly - - Opening Bell -



through the low com­mod­ity prices and min­ing tem­pest in style. That’s shown in in­terim re­sults (to end-May) where, de­spite be­ing bat­tered ear­lier, key num­bers are sound. The mar­ket has recog­nised this. Though the share price was up a lack­lus­tre 9,5% over the past year, it has surged ahead in the year to date by 18,7%.

That makes the share ap­pear ex­pen­sive. Ig­nor­ing the his­tor­i­cal non­sense PE ra­tio of 117 times, the for­ward PE, based on the re­sults, should come out at around 11 times. That makes in­vest­ment sense and is why Hu­daco is worth buy­ing.

But there is some risk. Hu­daco has been clever at di­ver­si­fy­ing away from prob­lem ar­eas through ac­qui­si­tions, but it still has con­sid­er­able ex­po­sure to min­ing and man­u­fac­tur­ing. Both these in­dus­tries are largely out­side the con­trol of Hu­daco and they could slow re­sults for the full year.

CE Graham Dun­ford is likely to con­tinue with ac­qui­si­tions but Hu­daco can­not com­pletely es­cape min­ing and man­u­fac­tur­ing. And the in­dus­tries, es­pe­cially min­ing, are no­to­ri­ously dif­fi­cult to call.

But on the flip side a re­cov­ery in min­ing, of which there has been some ev­i­dence at in­di­vid­ual mines, would pro­vide the boost to keep Hu­daco ahead of com­peti­tors in the in­dus­trial en­gi­neer­ing sec­tor.

Two points stand out in the in­ter­ims.

Cash flow in­creased by an in­cred­i­ble 190% to R328m, a trend that can be main­tained as Hu­daco has sev­eral cash-gen­er­a­tive busi­nesses.

And the div­i­dend pay­ment was up 16% to 180c, another rea­son to buy the share.

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