Latest news with #Trellidor
Daily Maverick
6 days ago
- Business
- Daily Maverick
The Finance Ghost: Invicta, Hudaco and Trellidor — A busy week in industrials
The industrial melting pot serves up some good news for Trellidor, while Invicta and Hudaco deliver contrasting narratives in their updates. The industrial sector on the JSE is the polony of the local market, as stocks that don't fit somewhere else tend to get lumped in here. If you buy an exchange traded fund tracking the FTSE/JSE Capped 25 Industrial index, you end up with Naspers and MTN as the two largest holdings – not exactly the angle grinders and heavy machinery that you may have pictured. Shoprite and Clicks are in there too, by the way, as the JSE doesn't have a retail index that is widely tracked. Moving on from the frustrating realities of our local market, there are of course many companies on the local market that are exactly what you imagine when you think of the word 'industrial' – bearings, machinery, manufacturing and automotive components, to name just a few verticals. This week, we saw earnings updates from Invicta and Hudaco in this sector, as well as news of a non-core asset disposal at Trellidor. Invicta vs Hudaco: Peers, or are they? It may come as a surprise to you that Hudaco's market cap is nearly double that of Invicta, as the latter tends to get more attention in the local market owing to its position as part of the broader Christo Wiese stable. Another surprise comes from drawing a 10-year share price chart, with Invicta having shed half its value and Hudaco having gained around 50% over that period – still a tepid compound annual growth rate over that period, but at least in the green. A year-to-date chart reveals that Invicta has enjoyed more positive recent momentum, with the share price up 5% this year, while Hudaco is 5% in the red. The narrative in the latest earnings announcements from each company would support that trend, as Invicta has a more bullish tone at the moment than Hudaco. Not least of all because of the Wiese influence, Invicta has pursued a more global strategy than Hudaco. This hasn't exactly led to a smooth journey, as evidenced by earnings per share only recently exceeding the levels seen a decade ago. Hudaco has been on less of a rollercoaster ride at least, but the generally weak levels of growth in South Africa have predictably led to an uninspiring growth story. This difference in geographical approach also explains some of the performance differential over 10 years. The starting point of that period saw Invicta trading at a premium multiple during the Lost Decade, when investors were desperate to escape the South African economic story, while Hudaco could offer no such protection to investors. In other words, a 10-year chart is a tough basis for comparison for Invicta. Still, the reality is that Hudaco is trading at a higher price/earnings (P/E) multiple than Invicta these days, with the market now appreciating the South African-focused strategy. It's just a pity that Hudaco's latest report paints such a bearish picture of local operating conditions – and one that is at odds with the improved investor sentiment around South Africa. Hudaco's earnings for the six months to May 2025 saw a 2.4% decrease in revenue and a 1.5% decrease in operating profit. This means that the operating margin was up (10.8% vs 10.4%), giving investors something to feel better about in the context of weak overall demand. Although headline earnings per share (HEPS) was 19.6% higher at 938 cents, it includes a fair value adjustment that shouldn't be considered part of maintainable earnings. It's safer to look at comparable earnings per share of 833 cents, which increased by 6.1% – still a respectable outcome based on the revenue pressure. Invicta's numbers covered the year ended March 2025, so we are dealing with very different periods here, even though both results came out in the same week. It has a more positive story to tell, with revenue up 6% and operating profit up 13%, reflecting significant margin expansion. There are a number of nuances to the numbers that make it difficult to know exactly where to focus from a HEPS perspective, but sustainable HEPS from continuing operations is probably the safest metric to use – it's up 22%. An interesting point to bear in mind in this Hudaco vs Invicta debate is that Hudaco's business includes a consumer-focused segment that generates around 45% of group profits. Yes, the underlying products may have more of an industrial flavour than most consumer businesses, but selling tools and gas braais to retail customers isn't nearly the same thing as selling bearings and heavy machinery to mines and heavy manufacturing customers. The latter has more of a moat, sure, but does tend to be more cyclical. Invicta is far more exposed to a B2B model in the industrials space, with customers in particularly cyclical industries such as mining and agriculture as well. This helps explain why Invicta's earnings profile is more cyclical than that of Hudaco. Both companies may be part of the broader industrial sector and seen as peers, yet they offer vastly different underlying exposure in both geography and business model. Although Hudaco has been the strong outperformer over most time periods, the tide seems to be turning – and with Invicta trading at a lower multiple than Hudaco while telling a more positive overall story, this will be an interesting one to watch going forwards. Trellidor finally catches a break Trellidor was up 22% in the past week. This means it has finally recovered to levels last seen in mid-2023, before things started to go extremely badly for the company. It has had a tough time, ranging from expensive labour disputes to questionable demand for the core products in a mature market such as South Africa, where an increasing number of consumers are choosing to live in complexes rather than standalone houses with security on every window. Security is the group's DNA though, and that's where it is focusing, with a decision to sell Taylor Blinds and NMC South Africa. These are 'pretty' products that aren't a good fit with the rest of the group. But more than that, with expected proceeds of up to R90-million, it has managed to achieve a great price for the business. In fact, based on recent interim profits, it looks like it achieved a higher P/E multiple for this disposal than the entire listed group was trading on. And of course, it certainly helps to use these proceeds to reduce debt. Trellidor was due a break, having had more than its fair share of bad luck in recent times. The question now is whether it can unlock growth engines in places such as the UK market. Even after the latest rally, it is still only trading on a P/E of 5.5x, so the market is still taking a cautious approach to this one. DM
Yahoo
27-05-2025
- Business
- Yahoo
Trellidor Holdings' (JSE:TRL) Returns Have Hit A Wall
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Trellidor Holdings (JSE:TRL), they do have a high ROCE, but we weren't exactly elated from how returns are trending. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Trellidor Holdings is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.23 = R71m ÷ (R446m - R133m) (Based on the trailing twelve months to December 2024). Thus, Trellidor Holdings has an ROCE of 23%. On its own, that's a very good return and it's on par with the returns earned by companies in a similar industry. Check out our latest analysis for Trellidor Holdings Historical performance is a great place to start when researching a stock so above you can see the gauge for Trellidor Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Trellidor Holdings. Things have been pretty stable at Trellidor Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. Although current returns are high, we'd need more evidence of underlying growth for it to look like a multi-bagger going forward. Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 30% of total assets, this reported ROCE would probably be less than23% because total capital employed would be 23% ROCE could be even lower if current liabilities weren't 30% of total assets, because the the formula would show a larger base of total capital employed. With that in mind, just be wary if this ratio increases in the future, because if it gets particularly high, this brings with it some new elements of risk. In summary, Trellidor Holdings isn't compounding its earnings but is generating decent returns on the same amount of capital employed. And with the stock having returned a mere 29% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options. If you'd like to know about the risks facing Trellidor Holdings, we've discovered 1 warning sign that you should be aware of. If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
