Our opinion on the current state of BCF

24 янв. 2024 г.

Bowler Metcalf (BCF) is a plastics manufacturing company that began in 1972 and listed on the JSE in 1987. The company's products include tube manufacture, printing, injection stretch blow-moulding, foiling and extrusion blow-moulding. This is a company which is clearly badly impacted by loadshedding. In its results for the year to 30th June 2023 the company reported revenue up 7% and headline earnings down 11%. The company's net asset value (NAV) increased from 925,2c per share to 974,8c. The company said, "The cost of a two-hour power outage equates production loss of over three hours. When this occurs for longer or more frequently, the damage is severe. In response to Eskom's unreliability, we (and many of our business partners) have undertaken an intense focus on reducing our reliance on this unstable power source." In a trading statement for the six months to 31st December 2023 the company estimated that headline earnings per share (HEPS) would increase by between 42,1% and 61,9%. The company said, "The improved financial results are due to increased sales in the Packaging segment." Technically, the share has been moving sideways for the past ten years but now looks ready for an upside breakout, but that is being impeded by loadshedding. It is quite cyclical and fairly thinly traded, with many trading days on which no shares change hands, which tends to limit institutional involvement. The company is on an undemanding P:E of 9,95 and a dividend yield (DY) of 3,16%. Following the sale of Softbev, it has a strong balance sheet and cash for possible acquisitions. It should perform in line with the South African economy going forward, but it is a difficult industry with significant working capital requirements. Fortunately, the company has a significant cash pile with minimal debt. It has also been buying its own shares back - which makes the share's liquidity worse than it already is, but should push up its net asset value (NAV). We see this as a relatively solid, unexciting, long-term investment - but relatively thinly traded.