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HoldSport (HSP) will be the stock in focus: (Price at time of writing: R62.99 as 10 May 2016)
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Background and overview of Holdsport (HSP)
Holdsport is a retailer in South Africa specialising in the retail of sports and outdoor clothing and goods and services. They own well known brands Sportsmans Warehouse and Outdoor Warehouse.
The following comes from their website:
"Holdsport’s journey into the life of an average South African family began in 1986 when the first Sportmans Warehouse opened its doors to the public in Rondebosch, Cape Town. The Group has since become the leading specialist sports and outdoor goods retailer, trading countrywide through the Sportsmans Warehouseand Outdoor Warehouse brands.
The growth of Holdsport has been underpinned by its retail model which ensures that all the stores cover a large area and offer scale, diverse brands and technical expertise. Holdsport pioneered the concept of dedicating a retail environment to the active sporting and outdoor enthusiast, providing customers with quality branded merchandise at competitive prices. Group stores house private in-house labels as well as local and international brands.
Holdsport’s strong and dynamic management team has played a significant role in the development of the company, establishing aformidable footprint in South Africa. The team’s sectoral experience over many years and Holdsport’s ongoing research has ensured that changes in market trends are anticipated ahead of time and responded to in an effective manner that protects the group’s market position and capital base."
With many South African's now pursuing a more active lifestyle they are ideally placed to take advantage of any uptickin the demand for sporting or outdoor goods (apparel and accesories)
The following comes from their website:
"Holdsport’s journey into the life of an average South African family began in 1986 when the first Sportmans Warehouse opened its doors to the public in Rondebosch, Cape Town. The Group has since become the leading specialist sports and outdoor goods retailer, trading countrywide through the Sportsmans Warehouseand Outdoor Warehouse brands.
The growth of Holdsport has been underpinned by its retail model which ensures that all the stores cover a large area and offer scale, diverse brands and technical expertise. Holdsport pioneered the concept of dedicating a retail environment to the active sporting and outdoor enthusiast, providing customers with quality branded merchandise at competitive prices. Group stores house private in-house labels as well as local and international brands.
Holdsport’s strong and dynamic management team has played a significant role in the development of the company, establishing aformidable footprint in South Africa. The team’s sectoral experience over many years and Holdsport’s ongoing research has ensured that changes in market trends are anticipated ahead of time and responded to in an effective manner that protects the group’s market position and capital base."
With many South African's now pursuing a more active lifestyle they are ideally placed to take advantage of any uptickin the demand for sporting or outdoor goods (apparel and accesories)
Scroll over or click on the funnel chart to get more details of HSPs latest financial results
Financial review:
Holdsport achieved a net profit margin of 12.7%, which for a retailer in South Africa is very good going. As we have seen from the more general retailers such as Shoprite and Pick 'n Pay, margins are extremely tight, granted HSP is a more specialised retailer and the market they are in is probably not as competitive as Shoprite and Pick 'n Pay's.
Holdsport's headline earnings per share came in at R5.31 a share, placing them on a PE of 11.8, which is not expensive by any stretch of the imagination. The even better news is the fact that their cash generation is very strong (it is a mostly cash business). HSP generated around R7.30 a share in cash.
Holdsport's headline earnings per share came in at R5.31 a share, placing them on a PE of 11.8, which is not expensive by any stretch of the imagination. The even better news is the fact that their cash generation is very strong (it is a mostly cash business). HSP generated around R7.30 a share in cash.
The graphic below shows the contribution of some of HSPs operating divisions
Its clear from the pie charts, that Sportsmans Warehouse is the main money spinner for Holdsport, with it bringing in over 75% of the turnover and pre-tax profits. What is interesting to see is the number of stores over time. Holdsport has not increased the number of Sportsmans warehouse's since 2013, while 2 new Outdoor warehouses was opened during the same time period.
The table below shows the number of outlets open per year:
The table below shows the number of outlets open per year:
Outlet |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
Sportsmans Warehouse |
32 |
32 |
33 |
35 |
35 |
35 |
Outdoor Warehouse |
18 |
17 |
18 |
19 |
20 |
21 |
A few financial ratios to mull over for Holdsport (calculated using our Financial Ratio Calculator):
- Debt to Equity Ratio: 0.35 (more than 2 shows high leverage).
- Current Ratio: 4.02 (a measure of liquidity. Less than one signals possible trouble in paying off current liabilities)
- Quick Ratio: 0.83 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt). This ratio is adversely affected by the fact that HSP has a lot of inventories. In fact it makes up the biggest part of their current assets
- Return on Assets (ROA): 16.6%
- Return on Equity (ROE): 22.40%
- Net Profit Margin 12.66%
- Dividend Yield 3.18%
Valuation:
Based on HSP's financial results, the markets they operate in and the economic environment they find themselves in, we value HSP at between R79.18 and R80.19 a share (this will put them on a hardly demanding PE ratio of 15). We therefore feel that Holdsport (HSP) is a buy at its current levels. Its not highly geared, has a mostly cash driven business with very strong cash generation capabilities and extremely strong balance sheet. Investors should just keep an eye on the inventory levels, if it starts to baloon they might be struggling to move their stock (as it is up by almost R100million) compared to the year before. Other than that its a sound business and well run and at current levels looks to offer great value to investors.
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.