Share Code: ARH – Market Cap: R1.3bn – PE: 6.8x – DY: 4.6%

FY 21 – Exceptionally strong results

• ARB Holdings released exceptionally strong FY 21 results with revenue roaring ahead by +24% y/y (and +8% versus FY 19) to R2.9bn (FY 20: R2.3bn) driven by a recovery in both Electrical and Lighting that is likely to carry into FY 22E (at least).
• Added to this top-line expansion, the Group’s cost-savings, efficiency gains & cash preservation all aided HEPS upwards by +38% y/y (and +41% versus FY 19) to 82.5cps (FY 20: 59.9cps) & making a mockery of our forecast FY 21 HEPS.
• The Group resumed its dividend payments and declared a full-year dividend of 42.5cps that includes a 10cps special dividend.

Our Thoughts: CEO continuity in place

• ARB’s results are even more impressive considering that they were produced during a period that saw a range of hard lockdown levels, multiple waves of COVID, Eskom loadshedding and a domestic recession.
• Long-serving CEO, William Neasham, has announced his retirement and lined up Blayne Burke as his successor.
• Burke has run the Group’s major Electrical Division for many years and, thus, provides deep institutional knowledge, expertise, and comfortable continuity at the executive level.

Forecast, Valuation & Implied Return: Margin of Safety

• We see fair value as 654cps (previously: 631cps) on a Price Earnings (PE) of c.7.9x, which is hardly demanding given the quality of the underlying businesses.
• Our EV/EBITDA-implied fair value of 740cps backs up this view, if not hinting at a degree of upside risk to our forecasts.
• Using our DCF as a base, our implied 12m TP of 766cps (previous 12m TP: 737cps) places the share on an Exit PE of 8.0x & implies a potential return of c.37%.
• Refer to our original Initiation of Coverage for more background.