Avior Capital Markets - Hudaco Industries Ltd. (104S) Hudaco | Diversification pays off

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Avior Capital Markets

Mpho Mokotso

Hudaco | Diversification pays off

HDC released an encouraging set of H1' 18 results where dHEPS and DPS increased by 8% and 6% yoy respectively. The diversification was beneficial as the Consumer Related (CR) segment supported both organic and inorganic earnings growth during the period. The Group decided to diversify away from mining and manufacturing in 2010 and CR now contributes 61% to group operating profit (FY' 10: 39%). Engineering Consumables' (EC) revenue growth was marginal. However, EC's earnings contracted as volumes of industrial consumables sold to mining and manufacturing sectors declined.

HDC remains cost efficient, as costs of incumbent businesses were limited to an inflationary increase. The Group has reduced its acquisitive streak to one acquisition, Boltworld, in the current year. Boltworld should begin contributing to earnings from H2' 18. HDC's net debt to equity levels remain conservative and the Group is cash generative.

20/07/2018 12 EN

Underlying

Hudaco Industries Ltd.

Hudaco Industries is engaged the import and distribution of engineering consumables, power tools and security, automotive and professional mobile radio communication products. The engineering consumables segment supplies engineering products such as bearings, hydraulics, pneumatics, filtration products, electrical cables, conveyor belting, pulleys, drives, and electric motors. The consumer-related products segment supplies automotive replacement parts; distributes imported maintenance free batteries, electronic security equipment, industrial power tools, marine engines, survey equipment and nuclear gauges; and provides telecommunications infrastructure and two-way radios applications.

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ZAE000003273 Johannesburg Stock Exchange South Africa

Provider

Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Mpho Mokotso

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Hudaco | Diversification pays off

1 director bought

Industrials | MTA, MPT, SPG, HDC, GSH, GND | Earnings Update_Small to Medium Cap Industrials

Tiger Brands | ESG | Pressed to execute

SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

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