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Santova (SNV) will be the stock in focus: (Price at time of writing: R3.99 as 22 September 2016)
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Background and overview of Santova (SNV)
Santova has been a share listed on the JSE that loads of punters suggested could be a possible 10 bagger. I.e. make your money over 10 fold. The punters werent wrong. 5 years ago their shares traded at 6c a share. Today they are sitting at close to R4 a share. In the last 5 years their shares have gone up 6500%, last 3 years it has gone up by 329%, last 2 years by 83% and in the last year they are up 33%. So who are they and what do they do, and how much are their shares actually worth?
According to their website: Santova is a specialist international trade solutions business listed on the South Africa stock exchange with offices throughout South Africa, Ghana, Mauritius, Australia, Germany, Netherlands, United Kingdom, Hong Kong and Mainland China.
The Groups strategy is to continually develop and invest in key differentiators that set it apart from its competitors. This is achieved by offering select clients comprehensive supply chain solutions that enable them to achieve competitive advantage through multi-dimensional innovative global supply chain solutions.
As companies continue seeking worldwide sourcing and distributing products in multiple markets, they require extensive sophisticated operational and logistics solutions across geographies. Through being extremely client-centric in its approach, Santova is able to capitalise on its international offices, systems and processes and leverage off a borderless and integrated world economy which is driven by globalisation and technological advancements.
According to their website: Santova is a specialist international trade solutions business listed on the South Africa stock exchange with offices throughout South Africa, Ghana, Mauritius, Australia, Germany, Netherlands, United Kingdom, Hong Kong and Mainland China.
The Groups strategy is to continually develop and invest in key differentiators that set it apart from its competitors. This is achieved by offering select clients comprehensive supply chain solutions that enable them to achieve competitive advantage through multi-dimensional innovative global supply chain solutions.
As companies continue seeking worldwide sourcing and distributing products in multiple markets, they require extensive sophisticated operational and logistics solutions across geographies. Through being extremely client-centric in its approach, Santova is able to capitalise on its international offices, systems and processes and leverage off a borderless and integrated world economy which is driven by globalisation and technological advancements.
Scroll over or click on the funnel chart to get more details of SNV's latest financial results.
Financial review:
SNV is sitting on a net profit margin of just 1.3%. Net profit amounted to R49million on gross billings of over R3.5billion. Margins are expected to be tight in this sector as there are a whole host of competitors such as Grindrod, Supergroup, Onelogix etc in the general logistics space in and around South Africa. Earnings per share of 34.5c (which places SNV) on a PE ratio 11.5
The graphic below shows the contribution of SNV's major regions to their Gross billings and contributions to pre tax profits.
What is interesting to note from the pie charts above is the significant contribution their European and UK businesses are making to their pre-tax profits. While it only makes up 22% of Gross billings, it contributes 50% to pre tax profits. While their African operations brings in almost 72% of Gross billings it only makes up 38% of pre-tax profits. Clearly strong competition in their African region is affecting margins, or their European operations are better run and able to extract higher margins than their African operations.
Cash generated per share for SNV amounted to close to 33c per share. For SNV as a whole they generated close to R42.3million in cash during the financial period in question. In addition to this they are sitting on a cash pile of R122.9million (or around 79c per share). So in essence almost 20% of SNV's current share price is made up in cash.
A gross dividend of 5.5c per share was declared at year end (placing SNV) on a dividend yield of 1.5%. Investors will not be buying SNV for it's dividend payouts but rather the possibility of further capital gains.
Looking at the balance sheet we are concerned about the amount of trade receivables still owed to SNV. 12months ago this figure was sitting at R495million. This number has ballooned to R590million in the latest financial year. That's an increase of 19.2%
Cash generated per share for SNV amounted to close to 33c per share. For SNV as a whole they generated close to R42.3million in cash during the financial period in question. In addition to this they are sitting on a cash pile of R122.9million (or around 79c per share). So in essence almost 20% of SNV's current share price is made up in cash.
A gross dividend of 5.5c per share was declared at year end (placing SNV) on a dividend yield of 1.5%. Investors will not be buying SNV for it's dividend payouts but rather the possibility of further capital gains.
Looking at the balance sheet we are concerned about the amount of trade receivables still owed to SNV. 12months ago this figure was sitting at R495million. This number has ballooned to R590million in the latest financial year. That's an increase of 19.2%
A few financial ratios to mull over for SNV (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio:1.65 (more than 2 shows high levels of financial leverage).
- Current Ratio: 1.36 (A measure of liquidity. Less than one signals possible trouble in paying off current liabilities).
- Quick Ratio: 1.36 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt).
- Return on Assets (ROA):4.88%
- Return on Equity (ROE): 12.91%
- Net Profit Margin: 1.31%
- Dividend Yield: 1.5%
Valuation:
Based on SNV's latest financial results, the market they operate in, and their strong performance from their offshoure businesses we value SNV between R4.76 and R4.81. But this one comes with a disclaimer. They are a very small fish in a big ocean of logistics companies. Investors should take this into account. When tough times hit bigger firms in their space such as GrindRod and SuperGroup will be far better placed with stronger balance sheets and access to greater amounts of capital to ride out such times. We therefore only recommend SNV for investors with the neccesary risk appetite.
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.