{"id":223,"date":"2019-02-25T08:04:24","date_gmt":"2019-02-25T08:04:24","guid":{"rendered":"http:\/\/bluegemresearch.co.za\/?p=223"},"modified":"2019-02-25T08:04:25","modified_gmt":"2019-02-25T08:04:25","slug":"arb-holdings-h119-awaiting-macro-tailwinds","status":"publish","type":"post","link":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=223","title":{"rendered":"ARB Holdings &#8211; H1:19 &#8211; Awaiting Macro-Tailwinds"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Share Code: ARH \u2013 Market Cap: R1.0bn \u2013 PE: 7.6x \u2013 DY: 4.6%<\/em><\/p>\n\n\n\n<div class=\"wp-block-file\"><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2019\/02\/ARB-Holdings_H1_19_Results-Note.pdf\">Download the full H1:19 results note here.<br><\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2019\/02\/ARB-Holdings_H1_19_Results-Note.pdf\" class=\"wp-block-file__button\" download>Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>H1:19 \u2013 Macro-headwinds\nRemain Strong<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>ARB Holdings had a disappointing H1:19 period with\nresults coming in lower than our expectations due to macro-headwinds.<\/li><li>South Africa\u2019s political-drag and Eskom challenges\ncontinue to negatively affect business confidence with direct knock-on effects\nin the construction and infrastructure markets.<\/li><li>The Group reported flat revenue (+1.1% y\/y)\nand\u2014ignoring the IFRS-adjustments relating to Put Options\u2014the Group\u2019s normalized\nearnings slipped -6.1% y\/y.<\/li><li>The Electrical segment saw the most pressure while the\nLighting segment managed mild growth from market share gains.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Our\nThoughts: Eskom &amp; Radiant (Still) Two Key Variables<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The Group is making all the right\nmoves: It has concluded the acquisition of Radiant that bolsters its Lighting\nsegment while the store roll-out continues in the Electrical Division.<\/li><li>Superb cash generation, margin\nmanagement and operational control remains firmly in place with the Group positioning\nitself for above-average future growth.<\/li><li>Despite this, Eskom\u2019s turnaround and\nrelated spend remain a major (upside &amp; downside) variable in the Group\u2019s\nprospects.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Forecast, Valuation\n&amp; Implied Return: Still Quality &amp; Still Value<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Our fair value for ARH is 636cps (previously: 714cps)\non an implied Price Earnings (PE) of 11.1x, indicating that the stock is c.48%\nundervalued at its current share price.<\/li><li>Rolling our fair value forward at our CoE, we arrive\nat a 12m TP of 744cps (previous 12m TP: 838cps) on an Exit PE of 12.2x.<\/li><li>While this exit multiple may be higher than normal, we\nsee the Group as having an embedded option on South Africa and Eskom\u2019s\nturnaround (currently a good thing, in our opinion).<\/li><li> Key risks to the Group are unchanged from our <a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?p=146\">Initiation of Coverage<\/a>, though Radiant has been consolidated from H2:19E. <\/li><\/ul>\n\n\n\n<div class=\"wp-block-file\"><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2019\/02\/ARB-Holdings_H1_19_Results-Note.pdf\">Download the full H1:19 results note here.<br><\/a><a href=\"http:\/\/v7l6z8c7j6p.c.updraftclone.com\/wp-content\/uploads\/2019\/02\/ARB-Holdings_H1_19_Results-Note.pdf\" class=\"wp-block-file__button\" download>Download<\/a><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><em>See our&nbsp;<a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?page_id=9\" target=\"_blank\" rel=\"noreferrer noopener\">methodology<\/a>&nbsp;here and note our disclaimer&nbsp;<a href=\"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/?page_id=17\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Share Code: ARH \u2013 Market Cap: R1.0bn \u2013 PE: 7.6x \u2013 DY: 4.6% H1:19 \u2013 Macro-headwinds Remain Strong ARB Holdings had a disappointing H1:19 period with results coming in lower than our expectations due to macro-headwinds. South Africa\u2019s political-drag and Eskom challenges continue to negatively affect business confidence with direct knock-on effects in the construction [&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":[52,91,53,20],"class_list":["post-223","post","type-post","status-publish","format-standard","hentry","category-arb-holdings-arh","tag-arb","tag-arb-holding","tag-arh","tag-small-cap"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/223","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=223"}],"version-history":[{"count":2,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/223\/revisions"}],"predecessor-version":[{"id":226,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=\/wp\/v2\/posts\/223\/revisions\/226"}],"wp:attachment":[{"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=223"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=223"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/v7l6z8c7j6p.c.updraftclone.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=223"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}