Our opinion on the current state of CSB

Cashbuild, recognized as the leading retailer of building materials and related hardware in Southern Africa, focuses on the home improvements market. Given the economic downturn in Southern Africa, the company's strategy for growth has largely been centered around the expansion of its store network. This approach indicates Cashbuild's preparation for enduring the current market challenges and positioning itself to capitalize on any potential upturn in the region's economic climate.

For the six-month period ending on 24th December 2023, Cashbuild reported a modest revenue increase of 2%, whereas its headline earnings per share (HEPS) saw a significant decrease of 20%. Furthermore, the company's net asset value (NAV) experienced a notable decline of 16% to 7757c per share. The revenue from stores operating before July 2022 (312 pre-existing stores) saw a slight increase of 1%, with the addition of nine new stores contributing another 1% to the growth. Despite maintaining gross profit levels, the gross profit margin percentage decreased from 25.3% to 24.7%, influenced by a selling price inflation of 3.2% at the end of December 2023 compared to the previous year.

From a technical perspective, Cashbuild's share price has seen significant fluctuations. After a steady decline starting in March 2018, the share price found its low at R120 in March 2020. It then experienced a notable rally to R337 by February 2021 before entering another downward trend. Currently trading at R131.58, with a price-to-earnings (P:E) ratio of 10.77 and a dividend yield of 4.45%, Cashbuild demonstrates the characteristics of a well-managed entity with a strong potential for growth, particularly if the Southern African economic landscape improves.

Despite its commendable management and strategic positioning within a challenging and competitive industry, the valuation still seems somewhat steep given the current market conditions. Potential investors might consider this aspect carefully, weighing the company's growth prospects against the backdrop of the broader economic environment and industry competition. Cashbuild's future performance will likely hinge on its ability to navigate the economic recovery of Southern Africa and leverage its expansion strategy to drive further growth.