Industrial Transportation
Imperial
AGM update
Share price:R160
Net shares in issue: 200 million
Market cap: R32,0 billion
Fair value: up to R200 per NAV, DCF and PER
Forward PE: 10x
Trading Buy on weakness
Further to my note on Imperial dated 3 October, “Value ahead of Motus unbundling”, this note gives more insight after the recent AGM.
Revenue and HEPS for Logistics and Motus to be up in F2019 – read mid to high single digit growth at best (with a flat H1 likely).
Imperial Logistics:
- Expect first half to be flat.
- Lower volumes and pricing pressure in SA, leading to headcount reductions.
- Nigeria and Mozambique seem ok but the Kenya acquisition is not performing.
- A weak result in H1 in Europe and UK
Motus:
Switch to lower priced cars. Forward cover has assisted pricing on imports (Hyundai/Kia)
Conclusion:
Imperial is hostage to external factors and should be priced as an ex growth, cyclical stock. Cutting suggests hunkering down for an anticipated continued weak local economy and competitive pressures across Logistics and Motus.
The AGM feedback will probably weigh on the stock but below R160 looks too cheap (forward PE 10x). There is value in stock ahead of the unbundling and I can justify value up to around R200.
Mark N Ingham
READ: How to read a fundamental analysis
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