Cashbuild trading update

The last update we got from Cashbuild was a sales update for the 53 week period which suggested revenues will grow 11% on the back of some margin growth. We used the figure of 24% to estimate growth in headline earnings. This was based on the figures we saw in the first half of the year, giving us an estimate of 1313c headline earnings for the year.


It turns out we were fairly accurate because yesterday Cashbuild gave us an earnings update which suggests "that when comparing the June 2012 results adjusted for 52 weeks trading, to the comparative figures for the June 2011 year that exclude the effects of the BEE repurchase of shares and subsequent distribution to Trust beneficiaries, the adjusted headline earnings per share and adjusted earnings per share for the year ended 30 June 2012 are expected to be 20% to 30% higher than the prior financial year's adjusted figures."


This means we should be expecting around 1300c for the full year. The share price has pulled back in the last 2 weeks from R168 to R158 today. The company is also a good dividend payer so expect a fat increase from last year where a big BEE deal was done. In fact, in the interim report they mentioned an improvement from their usual 3 times cover to 2 times. That means more or less 650c should be distributed. At current prices this affords us a historic multiple of 12.15 and a dividend yield of 4.1%. For a retailer which is showing strong signs of growth this looks very compelling. We continue to add at these levels and take advantage of the recent pull back. We will cover the full year numbers in the next few weeks which will give us the operational details and some forward looking guidance.