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Bidvest (BVT) will be the stock in focus: (Price at time of writing: R348.05 (18 May 2016))
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Background and overview of Bidvest (BVT)
It is often said that a consumer in South Africa would not be able to go a day without coming into contact with something that Bidvest either sold, supplied, provided a service for or manufactured. Bidvest has exposure to so many different sectors it is asif the company is an economy of it's own.
Their operations include but are not limited to the following:
Automotive
Electrical
Food Services
Financial Services
Freight
Commercial Products
Office and Print
Bidvest Services:
On Bidvest's website they state the following:
"We're an international services, trading and distribution company, listed on the JSE, South Africa and operating on five continents.
We employ 141 000 people worldwide, but our roots remain South African."
Their operations include but are not limited to the following:
Automotive
Electrical
Food Services
Financial Services
Freight
Commercial Products
Office and Print
Bidvest Services:
- Facilities Management
- Security Services
- Travel Services
- Industrial Services
On Bidvest's website they state the following:
"We're an international services, trading and distribution company, listed on the JSE, South Africa and operating on five continents.
We employ 141 000 people worldwide, but our roots remain South African."
Scroll over or click on the funnel chart to get more details of BVT's latest financial results
Financial review:
The net profit margin achieved by Bidvest amounted to 2.72%, Bidvest's net profit margin and their turnover reminds us of South Africa's large retailers with large turnover low margins . Think Pick 'n Pay or Shoprite). Bidvest is all about volumes. The bigger the volumes they get the bigger their profits will be. And a marginal increase in net profits will make a significant difference in total profits, considering the sheer size of their turnover. The company's turnover for full twelve months looks set to be in the region of R230billion (this makes Bidvest turnover the size of the 117th biggest economy in the world (assuming R12.78/$ for 2014 and using 2014 nominal GDP values and Bidvest's turnover for year ended June 2015 (which contains financial information from 2014). Bidvest's turnover for their 2015 financial year was more than the worth of the following countries economies:
- Senegal
- Equatorial Giunea
- Botswana
- Chad
- Zimbabwe
- South Sudan
- Namibia
- Mauritius
The pie chart below shows the contribution of Bidvests's operations to their revenue and pre-tax profit earnings.
Interesting results from the pie charts above. Bidvest Food Services is the biggest contributor to Bidvest's revenue, bringing in just over 58% of revenues, while its contribution to trading profits amounted to 45% of total trading profits. Bidvest South Africa on the other hand contributed almost 39% of Bidvest's revenues, but just over 51% of total trading profits. Clearly margins earned on the businesses under Bidvest South Africa is higher than the profit margins earned on food, in their Food Services division, Bidvest Namibia and Bidvest Corporate made very small contibutions to both revenues and trading profits.
Headline earnings per share for the 6months came in at R10.02 a share. Placing Bidvest on a PE ratio of around 17.4. Roughly the market average PE ratio.
Headline earnings per share for the 6months came in at R10.02 a share. Placing Bidvest on a PE ratio of around 17.4. Roughly the market average PE ratio.
A few financial ratios to mull over for Vodacom (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 1.22 (more than 2 shows high levels of financial leverage). Bidvest seems to have leverage under control
- Current Ratio: 1.15 (a measure of liquidity. Less than one signals possible trouble in paying off current liabilities)
- Quick Ratio: 0.76 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt). This ratio is greatly affected by Bidvest's inventory holdings (around R18billion).
- Return on Assets (ROA): 3.05%
- Return on Equity (ROE): 6.79%
- Net Profit Margin:2.72%
- Dividend Yield:2.77%
Valuation:
While the consumers in South Africa are under pressure, and MSM sitting with extremely low margins, and based on Massmarts financial results we value Massmart at between R102.41 and R103.45. We therefore feel that MSM is over priced at its current levels and would not recommend buying the share at this point in time. We would like to see increased margins or a far less demanding PE before we would recommend buying MSM above other retailers such as Woolworths or Shoprite
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
