{"id":157,"date":"2014-08-27T04:55:12","date_gmt":"2014-08-27T04:55:12","guid":{"rendered":"http:\/\/bluegemresearch.co.za\/?p=157"},"modified":"2014-08-27T04:55:12","modified_gmt":"2014-08-27T04:55:12","slug":"arb-holdings-fy-14-growth-despite-the-odds","status":"publish","type":"post","link":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=157","title":{"rendered":"ARB Holdings &#8211; FY 14 &#8211; Growth Despite the Odds"},"content":{"rendered":"<p><em>FY\u00a014 Results Note<em>\u00a0\u2013\u00a0<\/em>Share Code: ARH\u00a0\u2013 Market Cap: R1.8bn \u2013 PE: 15.5x \u2013 DY: 3.8%<\/em><\/p>\n<p>[wpdm_file id=11]<\/p>\n<p>&nbsp;<\/p>\n<p><strong>FY 14: In Line With Our Expectations<\/strong><\/p>\n<ul>\n<li>ARB Holdings reported their FY 14 results with revenue growing by 14% to R2,2bn (FY 13: R1,9bn) versus our forecasts of R2,3bn.<\/li>\n<li>The Group achieved better margins than we had expected due to both a rising contribution from the higher margin Lighting segment and from the Group driving purchasing savings across its business in H2:14, which saw HEPS rising nicely by 27% to 50.3cps (FY 13: 39.6cps) versus our expectation of 52.1cps.<\/li>\n<li>The Group remains highly cash generative and declared both a dividend of 20.1cps (FY 13: 16.2cps) and a special dividend of 10cps (FY 13: 10cps), yet remained ungeared (R197m net cash).<\/li>\n<li>While cognisant of the tough trading environment, management remain focussed on both organic growth and, potentially, adding the elusive \u201cthird pillar\u201d (acquisition) to the Group.<\/li>\n<\/ul>\n<p><strong>Our Thoughts: High Quality Group, High Quality Share<\/strong><\/p>\n<ul>\n<li>ARB has proven itself a remarkably high quality group in some very tough trading conditions as it successfully executes on its communicated strategies of expanding product lines, geographies and markets (both organically and acquisitively).<\/li>\n<li>While our valuation metrics indicate the share is fully valued, the \u201cquality\u201d quotient is a hard one to quantify and likely to prove very valuable for the long-term investor.<\/li>\n<\/ul>\n<p><strong>Forecast, Valuation and Implied Return: Attractively Priced<\/strong><\/p>\n<ul>\n<li>Our fair value for ARH is 715cps on a PE of 14.2x (previously 622cps). Rolling this forward at our Cost of Equity (CoE), we arrive at a 12m TP of 836cps (previous 12m TP: 727cps) on an Exit PE of 14.7x implying a total return of c.7%.<\/li>\n<li>The key risks stated in this report remain the same from our Initiation of Coverage on the Group. Also note the newly added risk relating to the phasing out of incandescent lamps in South Africa and the uncertainty it creates in the Lighting segment.<\/li>\n<\/ul>\n<p>[wpdm_file id=11]<\/p>\n<p><a title=\"Disclaimer\" href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?page_id=17\" target=\"_blank\">See our disclaimer<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>FY\u00a014 Results Note\u00a0\u2013\u00a0Share Code: ARH\u00a0\u2013 Market Cap: R1.8bn \u2013 PE: 15.5x \u2013 DY: 3.8% [wpdm_file id=11] &nbsp; FY 14: In Line With Our Expectations ARB Holdings reported their FY 14 results with revenue growing by 14% to R2,2bn (FY 13: R1,9bn) versus our forecasts of R2,3bn. The Group achieved better margins than we had expected [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[52,51,53,58,62,42,15,56,63,30,16],"class_list":["post-157","post","type-post","status-publish","format-standard","hentry","category-arb-holdings-arh","tag-arb","tag-arb-holdings","tag-arh","tag-building-materials","tag-cabling","tag-construction","tag-jse","tag-lighting","tag-qarv","tag-small-caps","tag-south-africa"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=157"}],"version-history":[{"count":2,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/157\/revisions"}],"predecessor-version":[{"id":159,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/157\/revisions\/159"}],"wp:attachment":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}