Roy Mutooni from Absa asset management says Bidvest’s growth prospects and defensiveness would compensate investors in the long term for paying the current premium.
Bidvest is an international investment holding company specialising in services, trading, and distribution.
Brian Joffe founded the Bidvest Group in 1988 and grew its portfolio to over 300 companies through an aggressive acquisition spree.
It was listed on the JSE in 1990, has a market cap of R75.42 billion, and employs over 120,000 people.
Bidvest generates 62% of its trading profit from services and reaches 300,000 customers through its offerings.
It operates through six divisions, listed below, with each division’s revenue contribution.
- Services – 34%
- Automotive – 23%
- Branded Products – 19%
- Commercial Products – 15%
- Freight – 7%
- Financial Services – 2%
Mutooni said Bidvest is a well-managed group that allows its acquired subsidiaries to grow independently.
Bidvest’s current PE ratio of 14.9 is at a premium to the industry average.
However, he feels the valuation is justified given the group’s growth prospects and defensiveness.
In Mutooni’s view, Bidvest will compensate investors with earnings growth and a reasonable dividend payout.
Bidvest released impressive figures in its audited financial results for the year ending 30 June 2022.
It increased its revenue by 13% to R99.9 billion, and its operating profits grew by 23% to R9.7 billion.
Four of the group’s seven divisions reported trading profits over R1 billion. All divisions, except for the financial services, grew revenue.
Bidvest’s share price increased from R190.76 to R221.9 year-to-date. The 16.32% return comfortably outperformed the -5.9% return of the JSE All Share index.
From 2015 to 2022, Bidvest grew its revenue every year, with only one exception.
It increased its market share through acquisitions and organic growth and increased its divisional operating profits.
Bidvest is not slowing down. It continues to acquire companies and keeps a strong balance sheet by growing EBITDA faster than its debt.