Our opinion on the current state of CMH(CMH)Combined Motor Holdings (CMH) operates 43 car dealerships representing 28 brands, including major names like Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu, and Ford. The company sells both new and used vehicles and is closely tied to the health of the broader economy, as consumers tend to hold onto their cars longer during economic downturns.
COVID-19 significantly impacted the company, prompting it to reduce its car rental staff by up to one-third, cut its fleet by 40%, and close 20 branches. Ongoing issues like electricity disruptions from Eskom and low business confidence have also negatively affected operations. Despite these challenges, the car rental division has been steadily recovering.
In its results for the six months to 31st August 2024, CMH reported a 1.3% decline in revenue and a 31.9% drop in headline earnings per share (HEPS). The company attributed these declines to poor returns in May and June 2024, influenced by political uncertainty during the run-up to the elections and the formation of a tentative Government of National Unity (GNU), which dampened consumer confidence and spending on high-cost items like vehicles.
Technically, the share made a "V-top" at 3350c on 10th May 2018 and then dropped sharply to around 950c in May 2020 due to the impact of COVID-19. Investors were advised to wait for a break above the long-term downward trendline, which occurred at 1489c on 2nd February 2021. Since then, the share has risen steadily to its current level of 3522c, where it trades at an undemanding price-to-earnings (P:E) ratio of 6.5.
In our view, CMH offers good value at these levels, making it an attractive option for investors.
CMH trade ideas
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.
Our opinion on the current state of CMHCombined Motor Holdings (CMH) runs car dealerships in Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu and Ford - selling both new and used vehicles. The motor industry is especially affected by the state of the economy because consumers can usually keep their vehicles on the road for longer in recessionary times. The company is planning to cut its car rental staff by as much as one third, its fleet by 40% and 20 of its branches because of COVID-19. Electricity disruptions from Eskom and low business confidence have negatively impacted the business. The car hire business has been recovering steadily. In its results for the six months to 31st August 2023 the company reported revenue up 7,7% and headline earnings per share (HEPS) down 12,9%. The company's net asset value (NAV) was up 7,9% at 1687c per share. The company said, "The drive to increase new unit sales in an effort to earn manufacturer volume incentives, and the passing on to customers of discounts received from those manufacturers, squeezed the gross profit margin slightly, from 19,7% to 19,2%". Technically, this share made a "V-top" at 3350c on 10th May 2018 and then fell heavily to around 950c in May 2020 as a result of COVID-19. We recommended waiting for a break up through its long-term downward trendline - which came at 1489c on 2nd February 2021. Since then the share has risen steadily to 2765c where it is on an undemanding P:E of 4,48. In our view, it represents good value at these levels.
Combined Motors showing upside but BAD liquidity Terrible liquidity of a stock.
The bias is bullish with higher lows and a Cup and Handle in the process...
We still need to price to break above the brim level, before we confirm the upside.
RSI is below 50 - which is not great but considering the high volatile low liquid nature of the stock, we can only expect it to move like this.
I remain optimistic and bullish with this...
CMH - COMBINED MOTOR HOLDINGS (Long)- Taking a spec long on this share for a recovery play (covid lockdown)
- The motor industry is resilient in SA
- Stop loss below the recent swing low
-- MANAGE YOUR RISK - -
Disclaimer: All ideas are my opinion and should not be taken as financial advice.
JSE:CMH