Our opinion on the current state of Combined Motor Holdings Combined Motor Holdings (CMH) operates 43 car dealerships, offering 28 brands such as Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu, and Ford. It sells both new and used vehicles, making it sensitive to economic conditions since consumers can extend the lifespan of their vehicles in times of recession. The company has planned significant cuts in its car rental division due to COVID-19, reducing staff by a third, the fleet by 40%, and closing 20 branches. Business confidence and Eskom-related power outages have negatively impacted operations, yet the car hire segment has been gradually recovering.
For the financial year ending February 29, 2024, CMH reported revenue growth of 3.3%, while headline earnings per share (HEPS) decreased by 12.2%. Its net asset value (NAV) rose by 8.2% to 1828 cents per share. The company noted, "Operating profit, before goodwill write-off in the previous year, is only marginally down from R791 million to R781 million. The hike in interest rates distinguishes the two years, with finance costs rising by R87 million from R193 million to R280 million."
Technically, the share formed a "V-top" at 3350 cents on May 10, 2018, before dropping significantly to around 950 cents in May 2020 due to COVID-19. After breaking its long-term downward trendline at 1489 cents on February 2, 2021, the share price has steadily risen to 2720 cents, trading at a price-to-earnings (P/E) ratio of 5.02. At these levels, CMH appears to offer good value.