Our opinion on the current state of CSB

Cashbuild (CSB) is the largest retailer in Southern Africa of building materials and related hardware, concentrating on the home improvements market. In the currently depressed economies of Southern Africa, most of the company's growth comes from opening new stores. Clearly, this is a share which is positioning itself for survival and to benefit from any general recovery in economic conditions in Southern Africa. In its results for the year to 25th June 2023 the company reported revenue down 4% and headline earnings per share (HEPS) down 38%. The company said, "Revenue for stores in existence prior to July 2021 (pre-existing stores - 308 stores) decreased by 6% and our 10 new stores contributed 2% growth. Gross profit decreased by 8% with gross profit margin percentage decreasing from 26.3% to 25.4%. Selling price inflation was 5.4% at the end of June 2023 when compared to June 2022." In an operational update for the 3 months to 30th September 2023 the company reported, "For the 312 existing stores (in existence prior to July 2022), revenue decreased by 2% and the 8 new stores contributed 2% growth. Transactions also remained at similar levels when compared to Q1 FY2023, with existing stores decreasing by 2% and new stores contributing 2% to the first quarter." In an update on the second quarter to 24th December 2023 the company reported revenue up 5% with same store sales up 3%. The company opened 9 new stores bringing the total to 321. Selling inflation was 3,2%. The company said, "Transactions through the tills during the second quarter for the Group increased by 1% (half year: flat) to that of the comparative period, with existing stores decreasing by 1% (half year: 1% down) and new stores contributing 2% (half year: 2%)." Technically, the share was in a steady downward trend from March 2018 but bottomed out in March 2020 at just over R100 per share. It subsequently rose to R337 in February 2021 before beginning a new downward trend. It is now at R168 and on a P:E of 13,75 and a dividend yield of 3.49%. Cashbuild is an extremely well-managed company and well-positioned to take advantage of any improvement in local economic conditions, but it is in a tough and highly competitive industry. It still appears a little expensive to us at current levels.