diversified industrials date: 22 january 2021...figure 30 bidvest - heps figure 31 cashbuild...
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Page 1
Diversified Industrials
Chart Book and Outlook
Key message: Strong outperformance over the last six months, but in
general still down from a year ago. The big movers were where balance
sheet concerns drove down valuations – but we would be switching to
the less-speculative better managed companies now. Gains in the
second leg of a cyclical recovery are the domain of higher quality
companies.
◼ As we move into 2021, we look at the performance of the Diversified
Industrials through 2020 and make some adjustments to our
recommendations after strong price moves.
◼ The sector has rebounded strongly over the past six months
(outperforming the ALSI), although the 12-month performance is still
mostly negative (underperforming the ALSI).
◼ The cyclical nature of the sector was highlighted through the Covid-19
lockdowns, with a number of large declines followed by significant
recoveries in share prices.
◼ Balance sheet concerns was the primary driver of the volatility as some
companies had to engage lenders for debt covenant relaxations.
◼ We can divide the sector along three main themes (with a direct link to
volatility):
◼ Higher quality - Conservative balance sheet, more sustainable and
stable businesses:
o Afrimat, Bidvest, Bidcorp, Cashbuild, KAP, Super Group,
Raubex, WBHO
◼ Middle ground – High operational gearing, structural change in
company or sectors:
o Barloworld, Invicta, Imperial, Motus
◼ Lower quality - Geared balance sheet, structural changes in
business model and more cyclical businesses:
o Nampak, PPC
◼ We continue to lean towards the higher quality companies in our
valuation ranking – there is still considerable gearing to an economic
recovery in South Africa and relative outperformance is still possible.
◼ The Covid-19 impact seems to moved from lockdowns to disruption
caused by high infection rates within companies. This could define the
1H CY21 results season as strong cost-cutting efforts implemented last
year are impacted by these disruptions.
◼ The implementation of a global vaccination program in 1H CY21 should
help some normalisation in 2H CY21, although this has likely been
priced in already. However, valuations remain low in the Diversified
Industrial sector and relative outperformance is possible should the
economic outlook improve.
Date: 22 January 2021 Analyst Rowan Goeller 082 801 2071
Diversified Industrials 22 January 2021
Chronux Research Page 2
Valuation Table
◼ Our forecasts and recommendations appear in the following table.
Figure 1 Valuation and Recommendation
Source: Factset, Chronux Research
◼ HEPS forecasts are shown below.
Figure 2 HEPS Forecasts
Source: Factset, Chronux Research
Company Ticker Share Price Target Price % Upside Recommendation
PPC PPC-ZA 1.58 2.94 86% Overweight
WBHO WBO-ZA 85.37 134.00 57% Overweight
Raubex RBX-ZA 23.01 30.52 33% Overweight
Invicta Holdings IVT-ZA 16.60 22.00 33%
Bidvest BVT-ZA 164.57 206.00 25% Overweight
Super Group SPG-ZA 25.10 30.50 22% Overweight
KAP Industrial KAP-ZA 3.73 4.28 15% Overweight
Nampak NPK-ZA 2.04 2.13 4% Neutral
Bidcorp BID-ZA 271.79 278.00 2% Neutral
Barloworld BAW-ZA 98.01 99.00 1% Neutral
Afrimat AFT-ZA 41.65 41.00 -2%
Cashbuild CSB-ZA 236.13 229.00 -3% Neutral
Imperial Logistics IPL-ZA 41.00 35.00 -15% Underweight
Motus Holdings MTH-ZA 60.50 51.00 -16% Underweight
1H FY20 2H FY20 FY20A 1H FY21 2H FY21 FY21E 1H FY22 2H FY22 FY22E
Bidcorp HEPS 7.27 0.12 7.40 4.05 7.82 11.86 6.58 8.76 15.34
Bidvest Normalised HEPS 6.09 4.17 10.27 6.01 6.22 12.23 9.19 7.68 16.87
Barloworld HEPS 268 -424 -156 305 405 710 472 591 1063
Cashbuild HEPS 762 376 1138 777 1002 1779 1090 1014 2104
Imperial Logistics HEPS 279 (128) 151 253 197 450 333 196 529
Invicta Holdings HEPS 1.49 (0.91) 0.58 1.72 0.92 2.64 1.73 1.59 3.32
KAP Core HEPS 21.7 -6.9 14.7 21.3 19.1 40.4 28.6 19.3 47.9
Motus Holdings HEPS 504 (216) 288 416 363 780 331 320 651
Nampak HEPS 7 (84) (77) 25 43 68 38 57 95
Super Group Core HEPS 165 5 174 132 150 282 196 195 391
Afrimat HEPS 180 163 344 181 261 442 102 135 237
PPC HEPS 36 -9 27 19 11 30 24 28 52
Raubex HEPS 58 102 161 -26 181 154 165 201 366
WBHO HEPS 411 -1334 -923 613 728 1341 890 902 1792
Diversified Industrials 22 January 2021
Chronux Research Page 3
Valuation Comparison – PE and EV/EBITDA
Figure 3 Diversified Industrials - PE Multiples
Source: Factset, Chronux Research
Figure 4 Diversified Industrials – EV/EBITDA Multiples
Source: Factset, Chronux Research
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
HY FY1 FY2 FY3
Diversified Industrial - PE
Bidcorp PE Bidvest PE Barloworld PE
Imperial Logistics PE KAP PE Motus Holdings PE
Super Group PE
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
HY FY1 FY2 FY3
Diversified Industrial - EV/EBITDA
Bidcorp EV/EBITDA Bidvest EV/EBITDA
Barloworld EV/EBITDA Imperial Logistics EV/EBITDA
KAP EV/EBITDA Motus Holdings EV/EBITDA
Super Group EV/EBITDA
Diversified Industrials 22 January 2021
Chronux Research Page 4
Figure 5 Diversified Industrials - PE Multiples
Source: Factset, Chronux Research
Figure 6 Diversified Industrials – EV/EBITDA Multiples
Source: Factset, Chronux Research
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
HY FY1 FY2 FY3
Diversified Industrial - PE
CSB PE Invicta Holdings PE Nampak PE PPC PE
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
HY FY1 FY2 FY3
Diversified Industrial - EV/EBITDA
CSB EV/EBITDA Invicta Holdings EV/EBITDA Nampak EV/EBITDA PPC EV/EBITDA
Diversified Industrials 22 January 2021
Chronux Research Page 5
Valuation Comparison – PE and EV/EBITDA
Figure 7 Diversified Industrials - PE Multiples
Source: Factset, Chronux Research
Figure 8 Diversified Industrials – EV/EBITDA Multiples
Source: Factset, Chronux Research
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
HY FY1 FY2 FY3
Construction - PE
AFT PE RBX PE WBO PE
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
HY FY1 FY2 FY3
Diversified Industrial - EV/EBITDA
AFT EV/EBITDA RBX EV/EBITDA WBO EV/EBITDA
Diversified Industrials 22 January 2021
Chronux Research Page 6
Share Price Performance
Figure 9 3-month share price performance Figure 10 6-month share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 11 12-month share price performance Figure 12 3-year share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 13 5-year share price performance
Source: Factset, Chronux Research
-50%
0%
50%
100%
150%
200%3-month
-50%
0%
50%
100%
150%
200%6-month
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%12-month
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%3-years
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%5-years
Diversified Industrials 22 January 2021
Chronux Research Page 7
Share Price Performance
Figure 14 Barloworld – Share price performance Figure 15 Bidcorp – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 16 Bidvest – Share price performance Figure 17 Cashbuild – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 18 Imperial – Share price performance Figure 19 Invicta – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
-60%
-40%
-20%
0%
20%
40%
60%
80%
3-month 6-month 12-month 3-years 5-years
BAW
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
3-month 6-month 12-month 3-years 5-years
BID
-40%
-20%
0%
20%
40%
60%
80%
100%
3-month 6-month 12-month 3-years 5-years
BVT
-60%
-40%
-20%
0%
20%
40%
60%
80%
3-month 6-month 12-month 3-years 5-years
CSB
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
3-month 6-month 12-month 3-years 5-years
IPL
-100%
-50%
0%
50%
100%
150%
200%
3-month 6-month 12-month 3-years 5-years
IVT
Diversified Industrials 22 January 2021
Chronux Research Page 8
Share Price Performance
Figure 20 KAP – Share price performance Figure 21 Motus – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 22 Nampak – Share price performance Figure 23 Super Group – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 24 Afrimat – Share price performance Figure 25 PPC – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
-80%
-60%
-40%
-20%
0%
20%
40%
60%
3-month 6-month 12-month 3-years 5-years
KAP
-40%
-20%
0%
20%
40%
60%
80%
100%
3-month 6-month 12-month 3-years 5-years
MTH
-150%
-100%
-50%
0%
50%
100%
150%
3-month 6-month 12-month 3-years 5-years
NPK
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
3-month 6-month 12-month 3-years 5-years
SPG
0%
10%
20%
30%
40%
50%
60%
70%
80%
3-month 6-month 12-month 3-years 5-years
AFT
-100%
-50%
0%
50%
100%
150%
200%
3-month 6-month 12-month 3-years 5-years
PPC
Diversified Industrials 22 January 2021
Chronux Research Page 9
Share Price Performance
Figure 26 Raubex – Share price performance Figure 27 WBHO – Share price performance
Source: Factset, Chronux Research Source: Factset, Chronux Research
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
3-month 6-month 12-month 3-years 5-years
RBX
-50%
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
3-month 6-month 12-month 3-years 5-years
WBO
Diversified Industrials 22 January 2021
Chronux Research Page 10
Financial Forecasts
Figure 28 Barloworld - HEPS Figure 29 Bidcorp - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 30 Bidvest - HEPS Figure 31 Cashbuild Holdings - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 32 Imperial Logistics - HEPS Figure 33 Invicta - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
-600
-400
-200
0
200
400
600
800
1000
1200
1400Barloworld - HEPS
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00Bidcorp - HEPS
0
2
4
6
8
10
12
14
16
18
20Bidvest - Normalised HEPS
0
500
1000
1500
2000
2500
3000Cashbuild - HEPS
(200)
(100)
0
100
200
300
400
500
600Imperial Logistics - HEPS
(2.00)
(1.00)
0.00
1.00
2.00
3.00
4.00
5.00Invicta - HEPS
Diversified Industrials 22 January 2021
Chronux Research Page 11
Financial Forecasts
Figure 34 KAP - HEPS Figure 35 Motus - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 36 Nampak - HEPS Figure 37 Super Group - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 38 Afrimat - HEPS Figure 39 PPC - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0KAP - HEPS
(400)
(200)
0
200
400
600
800
1,000
1,200Motus - HEPS
(100)
(50)
0
50
100
150
200Nampak - HEPS
0
50
100
150
200
250
300
350
400
450
500Super Group - HEPS
0
50
100
150
200
250
300
350
400
450
500Afrimat - HEPS
-20
-10
0
10
20
30
40
50
60
70
80PPC - HEPS
Diversified Industrials 22 January 2021
Chronux Research Page 12
Financial Forecasts
Figure 40 Raubex - HEPS Figure 41 WBHO - HEPS
Source: Factset, Chronux Research Source: Factset, Chronux Research
-100
0
100
200
300
400
500Raubex - HEPS
-1500
-1000
-500
0
500
1000
1500
2000
2500WBHO - HEPS
Diversified Industrials 22 January 2021
Chronux Research Page 13
Price/Book
Figure 42 Barloworld – Price/Book Figure 43 Bidcorp - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 44 Bidvest - Price/Book Figure 45 Cashbuild Holdings - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 46 Imperial Logistics - Price/Book Figure 47 Invicta - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
0
0.5
1
1.5
2
2.5BAW-Price/Book
0
1
2
3
4
5
6BID - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5BVT - Price/Book
0
1
2
3
4
5
6
7
8CSB - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5IPL - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5IVT - Price/Book
Diversified Industrials 22 January 2021
Chronux Research Page 14
Price/Book
Figure 48 KAP - Price/Book Figure 49 Motus - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 50 Nampak - Price/Book Figure 51 Super Group - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
Figure 52 Afrimat - Price/Book Figure 53 PPC - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
0
0.5
1
1.5
2
2.5
3KAP - Price/Book
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2MTH - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5
4NPK - Price/Book
0
0.5
1
1.5
2
2.5
3SPG - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5AFT - Price/Book
0
0.5
1
1.5
2
2.5
3PPC - Price/Book
Diversified Industrials 22 January 2021
Chronux Research Page 15
Price/Book
Figure 54 RBX - Price/Book Figure 55 WBHO - Price/Book
Source: Factset, Chronux Research Source: Factset, Chronux Research
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0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2RBX - Price/Book
0
0.5
1
1.5
2
2.5
3
3.5WBO - Price/Book