{"id":212,"date":"2018-03-12T04:31:58","date_gmt":"2018-03-12T04:31:58","guid":{"rendered":"http:\/\/bluegemresearch.co.za\/?p=212"},"modified":"2018-03-12T04:31:58","modified_gmt":"2018-03-12T04:31:58","slug":"arb-holdings-h118-results-improving-prospects","status":"publish","type":"post","link":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=212","title":{"rendered":"ARB Holdings \u2013 H1:18 Results \u2013 Improving Prospects"},"content":{"rendered":"<p><em>Share Code: ARH \u2013 Market Cap: R1.3bn \u2013 PE: 7.6x \u2013 DY: 3.65%<\/em><\/p>\n<p><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2018\/03\/ARB-Holdings_H1_18_Results-Note.pdf\" target=\"_blank\" rel=\"noopener\">Download the full H1:18 results note here<\/a><\/p>\n<p><strong>H1:18 \u2013 Operationally Robust<\/strong><\/p>\n<ul>\n<li>ARB Holdings reported revenue +5% for H1:18 and operating profit growing +3%.<\/li>\n<li>The mark-to-market fair value changes in the Put Option for Eurolux distorted the IFRS numbers by 5.9cps, but excluding this effect, the Group\u2019s HEPS would have been +13% y\/y to 31.72cps (H1:17 \u2013 28.07cps). This is materially better than our bottom-line expectations for FY 18E.<\/li>\n<li>One sore point in the Group\u2019s results was its Lighting segment where revenue slipped and profits felt pressure as consumer destocking, technology and delays combined.<\/li>\n<li>Post-reporting period, the Group acquired a 60% interest in Craigcor for a maximum consideration of R30m. The business is a process automation distributor for Rockwell Automation products.<\/li>\n<\/ul>\n<p><strong>Our Thoughts: Well-positioned for an \u2018SA Inc\u2019 Recovery<\/strong><\/p>\n<ul>\n<li>While risks remain and \u2018big ticket\u2019 infrastructure spend roll-out is always lagging, ARB Holdings is extremely well to benefit from the de-risking of South Africa, the recovering sentiment and the potential recovering domestic economic activity.<\/li>\n<\/ul>\n<p><strong>Forecast, Valuation &amp; Implied Return: Getting Exciting\u2026<\/strong><\/p>\n<ul>\n<li>We raise our estimated fair value for ARH to 777cps (previously: 687cps), which puts the stock on an implied Price Earnings (PE) of 10.0x and implies that it is currently c.44% undervalued.<\/li>\n<li>In our opinion, this 10.9x PE is reasonable when measured against either itself or comparatives.<\/li>\n<li>Rolling our fair value forward at our Cost of Equity (CoE) we arrive at a 12m TP of 911cps (previous 12m TP: 809cps).<\/li>\n<li>A 12m TP of 911cps places the share on a fair Exit PE of 14.5x, though we note a number of timing and environmental risks to our view.<\/li>\n<li>Our 12m TP implies a return of c.69%.<\/li>\n<li>Despite improving domestic sentiment, key risks to the Group are unchanged from our original <a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=146\" target=\"_blank\" rel=\"noopener\">Initiation of Coverage<\/a>.<\/li>\n<\/ul>\n<p><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2018\/03\/ARB-Holdings_H1_18_Results-Note.pdf\" target=\"_blank\" rel=\"noopener\">Download the full H1:18 results note here<\/a><\/p>\n<p><em>See our\u00a0<a title=\"Methodology\" href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?page_id=9\" target=\"_blank\" rel=\"noopener\">methodology<\/a>\u00a0here and note our disclaimer\u00a0<a title=\"Disclaimer\" href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?page_id=17\" target=\"_blank\" rel=\"noopener\">here<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: ARH \u2013 Market Cap: R1.3bn \u2013 PE: 7.6x \u2013 DY: 3.65% Download the full H1:18 results note here H1:18 \u2013 Operationally Robust ARB Holdings reported revenue +5% for H1:18 and operating profit growing +3%. The mark-to-market fair value changes in the Put Option for Eurolux distorted the IFRS numbers by 5.9cps, but excluding [&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":[51,53,54,75,57,87,86,84,80,15,60,83,20,16,82,85],"class_list":["post-212","post","type-post","status-publish","format-standard","hentry","category-arb-holdings-arh","tag-arb-holdings","tag-arh","tag-cables","tag-electrical","tag-electrical-wholesaling","tag-fundamental-research","tag-growth-investing","tag-investing","tag-investment","tag-jse","tag-research","tag-sa-inc","tag-small-cap","tag-south-africa","tag-stock-market","tag-value-investing"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/212","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=212"}],"version-history":[{"count":3,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/212\/revisions"}],"predecessor-version":[{"id":216,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/212\/revisions\/216"}],"wp:attachment":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}