WATCH: Stock picks — RMI and CMH
Alex Duys from Umthombo Wealth chose Combined Motor Holdings (CMH) as his stock pick of the day and Waldo du Plessis from Nitrogen Fund Managers chose Rand Merchant Investments (RMI).
Duys said CMH is a high-quality business, with an excellent management team.
“Their valuation is quite attractive at the moment. They paid down their debt of late and that means that all excess cash going forward will be applied to share buybacks. If you look over the last five years, 97% of their free cash flow has been allocated to dividends or share buybacks. With their share buyback, there will be a significant uptick in their share price in the short term.It’s been sold off quite a lot in their recent highs.”
With reference to RMI, Du Plessis said many people are looking for topline growth or cost containment to get bottomline growth. “Looking at RMI, if you strip out the investment in Discovery and MMI, MMI hurt them when they cut the dividend, and they made an investment in Hastings, which is listed in the UK. If you strip out these companies, you are left with Outsurance, which is is a great company and they are trading at a 4.5 times price to book value, which is significantly lower than the listed peers in SA.”
Alex Duys from Umthombo Wealth and Waldo du Plessis from Nitrogen Fund Managers talk to Business Day TV