Following the release of Bidvest Namibia Limited’s (BVN) FY18 results, Simonis Storm Securities adjusted its FY18/19/20 Headline earnings forecasts for the company by -37.7%, -68.7% and -109.5% to 9.29 cents, 5.36 cents and -2.11 cents, respectively.
Says the firm’s analyst Megameno Shetunyenga “Our adjustments were mainly driven by an additional downward adjustment on revenue, upward adjustment on opex and once off items such the N$ 48.8 million capital profit from the sale of another vessel reported.”
She said their three year HEPS CAGR forecast is now -109.4% given the sharp downturn brought on by the slowdown in the economy as well as the dire state of the fishing business.
Should the fishing business be disposed of successfully (as has been disclosed on SENS), then Simonis Storm’s HEPS forecast for FY19E and FY20E will increase to between 8.00 and 15.00 cents per share, says Shetunyenga.
“We do not expect the sale of Bidfish to take effect in the current financial year. We expect a special dividend to be paid should the transaction be successful. On the back of these adjustments to our model we reduce our TP to N$5.00 (from N$6.00) as we roll forward our valuation and maintain our rating at SELL,” she adds.
Meanwhile, a rough economic tide was reflected by poor results on the company’s performance.
The group’s revenue decreased by 9.8% in the reported half year results, compared to Simonis Storm’s previous FY18E forecast decrease of 4.4%.
Simonis Storm further adjusted its forecast and now expects BVN’s overall group revenue to decrease by 6.3% Y-o-Y.
Says Shetunyenga, “We adjust further our ZAR/USD forecast for the fishing division to 12.75, 13.00 and 13.25 for FY18,19,2, respectively. This is on the back of the ZAR strengthening against the dollar and also given the six-month average reported of ZAR/USD of 13.45. Our adjustments are also away from the Bloomberg consensus ZAR/USD forecast previously used.”
The fishing division revenue forecast for FY18E is updated to a 16.6% decline.
Shetunyenga says they expect the fishing division revenue to remain under pressure due to a very competitive and tough operating environment.
“We also expect a 12.7% decline in the Automotive division revenue on the back of a further decline in new vehicle sales numbers. However, the positive may be the increase in other revenue in the Automotive division such as second-hand vehicle sales, vehicle services and car parts sales as guided by management to be the area of focus in the medium term.”
She adds, “We do not like the fact that opex is not following the same trend as revenue. Opex only decreased by 1.6% in the asix-months numbers reported. Management guided that this is due to further restructuring costs incurred, further increase in opex at some of the growing fishing trading division, increase in fishing levies due to legislation and foreign exchange losses on a stronger rand and weak kwanza. In our valuation we included a further adjustment relating to foreign exchange losses of N$16.4 million, as reported by management for the month of January 2018. This is mainly resulting from approximately 15% of group cash that is held in Angola.”
On the way forward, Shetunyenga says they are yet to see the results from the attention that management have been giving to the inefficiencies at the Food & Distribution division.
At the same time management has indicated that there were small acquisitions made and are looking to make further small acquisitions.
“Considering that there have been low performance from the existing businesses, any positive result can actually make a dent to the current numbers and should be considered as upward risks to our valuation. We are however of the view that management should hold off any major acquisitions in the medium term and focus on improving existing operations. We have outlined the poor capital allocation from BVN management in past reports and are still of the view that excess cash should be returned to shareholders. No dividend was declared on interim results; however, management did indicate that a further assessment will be done at final results,” she concludes.