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Value Logistics (VLE) will be the stock in focus: (Price at time of writing: R2.87 as 19 October 2016)
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Background and overview of Value Logistics (VLE)
Value Group Limited (“the Group”) and its subsidiaries provide a comprehensive range of tailored logistical solutions throughout southern Africa. The operating divisions specialise in providing a diversified range of supply chain services, which encompass distribution, transport, clearing and forwarding, warehousing, container and fleet management and forklift and commercial vehicle rental and leasing.
They listed in the same sector as SuperGroup, Grindrod and Onelogix. With SuperGroup and Grindrod being the preferred stocks in the sector for fund managers and market participants. VLE is not exactly the most liquid of shares or most traded share on the JSE. On the day of the release of their interim results, their shares drop 9% on only 1600 odd shares traded.
They listed in the same sector as SuperGroup, Grindrod and Onelogix. With SuperGroup and Grindrod being the preferred stocks in the sector for fund managers and market participants. VLE is not exactly the most liquid of shares or most traded share on the JSE. On the day of the release of their interim results, their shares drop 9% on only 1600 odd shares traded.
Scroll over or click on the funnel chart to get more details of VLEs latest financial results
Financial review:
VLE managed to squeeze out a net profit margin of just over 1.7%. Essentially for every R100 coming in in revenue, they make R1.71. This is an extremely low profit margin. This is a slight improvement from the 1.5% profit margin achieved 12months prior. We have written about VLE's low profit margin before (and the fact that they mentioned implementing cost cutting measures). Read earlier review here.
The graphic below shows the contribution of some of VLE's operating divisions to their revenues and profit before taxes.
As can be seen from the pie charts above their general distribution division is the main source of revenue and pre-tax profits for VLE. VLE's headline earnings per share came in at 14.4c for the 6months ended (placing VLE on a PE ratio of around 10). Not exactly the most demanding PE on the JSE. VLE announced a 6c a share dividend. Placing them on a dividend yield of 4.2% (if full year dividend matches the interim dividend).
Cash generated per share came in at 43c a share. Or R81.6million. Strong cash generation from VLE. On the worrying side is the fact that trade and other receivables on their balance sheet listed as an "asset" increased to R326mil from R285mil prior 12 months. That's an increase of 14.3%. sers of VLE services that has used a service but not paid for the service delivered yet. On the flip side VLE's trade and other payables (paying for services rendered to them remained relatively unchanged). But VLE should make sure this number does not spiral out of control. Their debt collection processes should be tightened up to ensure they dont incur write off's due to clients not paying them back for services rendered.
Value is operating in a very competitive sector cramped with competition from the likes of GrindRod, SuperGroup, Onelogix etc to name but a few. The question is whether their shares offer investors better long term value than the others? Valuation for Value Logistics below.
Cash generated per share came in at 43c a share. Or R81.6million. Strong cash generation from VLE. On the worrying side is the fact that trade and other receivables on their balance sheet listed as an "asset" increased to R326mil from R285mil prior 12 months. That's an increase of 14.3%. sers of VLE services that has used a service but not paid for the service delivered yet. On the flip side VLE's trade and other payables (paying for services rendered to them remained relatively unchanged). But VLE should make sure this number does not spiral out of control. Their debt collection processes should be tightened up to ensure they dont incur write off's due to clients not paying them back for services rendered.
Value is operating in a very competitive sector cramped with competition from the likes of GrindRod, SuperGroup, Onelogix etc to name but a few. The question is whether their shares offer investors better long term value than the others? Valuation for Value Logistics below.
A few financial ratios for VLE (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 1.35 (more than 2 shows high levels of financial leverage).
- Current Ratio: 1.03 (A measure of liquidity. Less than one signals possible trouble in paying off current liabilities).
- Quick Ratio: 0.82 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt).
- Return on Assets (ROA): 1.3%
- Return on Equity (ROE): 3.07%
- Net Profit Margin: 1.71%
- Dividend Yield: 4.2%
Valuation
Based on VLE's financial results, the markets they operate in and the economic environment they find themselves in, we value VLE at between R3.07 and R3.18 a share (not much higher than our previous valuation even though profits per share showed strong increase). This is largely due to the fact that trade and other receivables are increasing and we would rather be a bit more cautious in our valuation in case some of their clients start defaulting on paying their debt, as this will have an impact on their income and assets. Also look at Grindrod (GND) or SuperGroup (SPG)
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