Makuyana_Against_assignment_1_investor_report(PDF)[1]

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INVESTOR’S REPORT

A VALUATION OF:

CASHBUILD HOLDINGS LIMITED

July 2014

Prepared By : Makuyana Against:BAccScie(Hons)-Wits(Cume-Laude)

Research Analyst at Robert Gabrial Security and Bonds Research Institute of South Africa

Student Number: 582309

Signed : A.Makuyana

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CONTENTS PAGE Executive Summary……..……………………………………………………………………………………………..3 History of Cashbuild…………………………………………………………………………………………………….3 Strategy employed………………………………………………………………………………………………………3 Company Prospects..…………………………………………………………………………………………………..4 Model Assumptions…………………………………………………………………………………………………....4 .Weighted Average Cost of Capital………………………………………………………………….……4 .Terminal Growth Rate of Free CashFlows…………………………………………………………...4 .Discounted Cash flow Model Variables……………………………………………………………….4 . Dividend Discount Model………………………………………………………………………………….…8 . Net Asset Value…………………………………………………………………………………………………..8 . Price/Earnings Ratio…………………………………………………………………………………………...8 VALUATION OF CASHBUILD SHARES USING MODELS………………………………………………….8 CONCLUSIONS AND RECOMMENDATIONS………………………………………………………………...9

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EXECUTIVE SUMMARY Cashbuild Limited(Cashbuild) is a South African based Retailer of Building materials and associated products with a 36 years of experience in providing quality building materials at lowest prices. It has 215 stores growing throughout the region(SADC) (company profile-http://www.cashbuild.co.za/Profile.php). Its vision is to be the first-choice retailer and supplier of building materials and associated products and services in every region of southern Africa and selected regions in African countries and to make a positive contribution in every community in which we trade. Cashbuild CORE VALUES as outlined in the 2013 Annual Report are as follows • We follow through to be successful • We strive to do it right first time, every time • We take responsibility in contributing to the company’s success • We recognise and reward outstanding performance • We listen attentively • We communicate and share all relevant information • We encourage people to seek ways to improve and innovate • We deliver exceptional service and total customer satisfaction • We show respect, honesty and integrity in all our dealings • We empower our people to develop to their fullest potential • We have pride in our work, our company and ourselves • We contribute to the communities in which we trade • We treat people fairly and equitably • We manage our business by “The Cashbuild Way.

COMPANY HISTORY Cashbuild limited was founded in 1978 and was listed on the

Johannesburg Stock Exchange in 1986.For the Financial year ending 2003 the company had grown to about 113 stores and by the end of the 2004 financial year end the company has grown into one of the biggest retail shops in the region with about 124 stores and employing 1812 employees(2003) and 1978 employees(2004). Acquisitions ,mergers and other expansion strategies have led to the company to worth about R2,501,029,578.61 (Discounted Cashflow Calculation).

Customers have always been typically home builders and improvers, contractors (plumbers, electricians, general builders and decorators), farmers, traders and increasingly, large construction companies and government-related infrastructure developers, as well as any person looking for quality building materials at lowest prices. Although Cashbuild is not in the top 40 JSE Companies, the company has continued to grow exponentially since formation. At the end of 2013 Cashbuild was the largest retailer of Building materials in South Africa. Revenue had continued to grow at an average of ……. And was pegged at R6 376 945. The number of employees was 4 552 by the end of the 2013 Financial year. Its BEE Contributor level has increased from level 4 to level 5. Cashbuild operates in five countries namely South Africa(175 stores), Botswana(10 stores), Malawi(1 store),Lesotho(5 stores), Swaziland(6 stores), Namibia(3 stores). Cashbuild limited owns 100% of Cashbuild Management Services (Pty) Ltd which owns majority stakes in various entities shown below: Cashbuild(SA) Pty Ltd(100% Holding), Cashbuild(Botswana) Pty Ltd(100% Holding), Cashbuild (Lesotho) Pty Ltd(80% Holding), Cashbuild(Swaziland) Pty Ltd(100% Holding),Cashbuild(Namibia) Pty Ltd(100% Holding), Cashbuild(Lilongwe) Pty Ltd (51% Holding), Cashbuild(Kwandebele) Pty Ltd(100% Holding), Cashbuild(Transkei) Pty Ltd (100% Holding), Roofbuild Trusses Pty Ltd(71% Holding), Cashbuild(Kanye) Pty Ltd(100% Holding), Tradebuild Pty Ltd (100% Holding). Cashbuild has been ranked as one of South Africa’s top companies by media publications such as Business Mail ,Financial Mail and the Sunday Times. Independent rating companies continuously rank Cashbuild as one of the top retail outlets in the local and African markets. Moreover Cashbuild is proud to have won the Best Retailer in the Hardware and Building Section, in The Times and Sowetan and 3rd in Deloitte’s ‘best employer to work for’ survey in 2013.This

proves that the Company is on the right track in terms of brand loyalty building in this extremely competitive environment.

STRATEGY EMPLOYED Despite the continuing tough macroeconomic conditions, Cashbuild has been relatively doing quite well due to the unwavering commitment to its proven long-term strategies and business model, along with efforts to streamline overheads (for example by R1 133 million in the 2013 Financial year). The company has been relying much on diversification; which involves expanding existing shops and creating new shops in new markets that have not been tapped. Next year the company plans to open 10 more shops(2013 Annual Report page 28) . This has seen the opening of the 200th Cashbuild store in Ontdekkers Road Roodepoort. This has continued to keep revenue increasing over the period. Cashbuild’s strategy is to refurbish/upgrade all stores on a rolling five-year period. During the financial year 20 stores were refurbished and six relocated. Relocation is only approved if it meets strict operational and financial criteria. Furthermore the company aggressively rolled out new IT systems has also contributed to the sustaining of the higher turnover. These effects are evidenced in our financial results, with turnover of R6 377 million (1% up on prior year) and profit before taxation of R352 million (down on prior year by 19%). In the short to medium term, the company continues to focus on current business because of its proven success: to expand our store base following processes which result in us building the foundation for solid, long-term and strategically important relationships, and partnering with its suppliers and strengthening its understanding of client base and their specific needs. Cashbuild is able to build strong relations with suppliers and employees by purchasing products from local suppliers in the areas in which it trades. By implementing this policy it supports local employment, distribution of wealth, reduces transport costs and enables Cashbuild to offer local store customers more competitive prices, provided those local suppliers are committed and capable, together with our support, to provide a predictable supply of quality products at competitive prices. Moreover there is on-going stakeholder engagement, which has grown as part of the culture of Cashbuild over time, as simply ‘the way we do business’, has provided Cashbuild with opportunities to learn, grow and to improve the way it does its business. Cashbuild regard our investment and re-investment into the southern African region with pride and expectation of further future growth of the company and in the regions in which we operate. To make Cashbuild a more attractive brand to governments and communities, it is Cashbuild’s ambition to provide business support to all the communities in the regions in which it operates. This compliments Cashbuild’s corporate social responsibility initiatives. In line with its strategy to growing its market share to 30%, Cashbuild have increased its reach through store numbers during the current year by nine (2012: four) and have, relative to its competitors, performed well. With these store openings, Cashbuild increased its staff complement to 4 552 (2012: 4 453) and invested in the communities in which we trade, with a CSI commitment of R122.1 million (2012: R95 million). The executive and management team at Cashbuild geared itself to proactively assess and respond to the medium to long-term challenges and risks of operating in the southern African markets and to avail itself to potential opportunities which complement its current business model and strategy by coming up with various strategies which included the launching of American Depositary Receipt (ADR) Level 1 Programme on the over-the-counter market in the United States through a sponsored ADR programme with Bank of New York Mellon. This enables US investors to directly buy Cashbuild shares and to participate in the growth of Cashbuild as a whole new stakeholder group. Cashbuild’s secondary strategy is market development, where it seeks to diversify its customer base. This has been done by Cashbuild through:

.focused micro-marketing;

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.clearly identifying and meeting the specific needs of our customers in each of the areas in which we trade;

.delivering consistent quality customer service; . everyday lowest prices (will beat any price or quotation); . stocking quality product fit for purpose (never sell seconds); . always in stock; . convenient and dependable delivery service at each store;

and . management and staff trained, passionate about quality

service to each customer and the Cashbuild business(Strategy outlined since

2004, in the 2004 Annual Report) This has allowed the Cashbuild Group to cater to a large number of customers in varying socio-economic categories. Lastly Cashbuild strives to continue to increase its revenue by exploring ancillary initiatives and fast-tracking pilot projects to achieve the same higher result. During the year ending 2013 they spent time and effort through third party formal marketing surveys, to better understand the demographics and needs of its prime target customers, which were believed to remain primarily the cash-paying individuals making necessary domestic improvements and structural repairs as well as the contractors who service them. The results, which were used to improve and streamline the company’s marketing and advertising spending, yielded interesting avenues for potential exploration and growth. Management is confident that, even in a depressed economic climate with relatively slow growth, Cashbuild’s markets will continue to grow steadily, supported by government’s drive to increase home ownership and the continued striving of private home builders and developers to meet the aspirations of more home owners for larger and better housing. Cashbuild’s investment and re-investment into communities, via development and support of local suppliers and providing local opportunities for wealth creation, was seen as a crucial part of the company’s strategy for our sustained growth and stability in some tough operational regions. To ensure enhanced future profits of its new stores, Cashbuild has continued with the initiative whereby, it teams up with its store developers and replace their funding from banks with its own cash resources. In essence, it’s a prepayment of the rental for the term, allowing the landlord to offer a reduced rental and escalation throughout the rental term. This will ensure improved profitability of its stores into the future. Limited opportunities of this nature arise and in the past year Cashbuild concluded another two of these transactions bringing to date five successful contracts of this nature. Cashbuild expect to continue offering this to all new store developers.

Home ownership and improvement is still seen as the most reliable and profitable investment in all the regions in which Cashbuild trades. Recent market research has confirmed that Cashbuild is still the first-choice supplier of quality building materials in all the markets in which it is represented. The group is confident that it will be able to maintain its record of rewarding stakeholders and share owners with improving sustainable results into the foreseeable future.

COMPANY PROSPECTS Cashbuild’s revenue streams are expected to diversify in the short to medium term given the company’s plans to build new stores in South Africa, Other African countries. During each year, the company plans to add ten more additional stores(2013 Annual Report page 28) .This is projected to eventually see the market share grow by up to 30% finally and year on year in the medium to long term. For the year ended June 2013 alone, Cashbuild had 15 new stores opened(CEO Report). The company also expects to keep on increasing its shopping transactions which is currently pegged at 14.2 million by continuous training of its employees and ensuring that customer complaints are addressed urgently.

MODEL ASSUMPTIONS Weighted average Cost of Capital In the determination of the weighted average cost of capital of 13% for the purposes of the discounted cash flow model, the following estimates and assumptions were used:

.In calculating the cost of equity of 13,46%, the CAPM model was used (Rf + β x Rm).

.The risk free rate (Rf) used was 12% which was based on the return on a government-issued long term bond.

.The market risk premium - Rm - (the difference between the long-term return on the market and the risk free rate) was then determined to be 6%.

.Beta (β) represents the volatility of the Cashbuild share price against movements in the market. The beta of 0.2435 that was used was computed through statistical analysis of the monthly percentage movements between the JSE All Share and the Cashbuild share(CSB).

Beta of Cashbuild

Key X-axis-Monthly movements in all shares Y-axis- Monthly change in Cashbuild Share Price The after-tax cost of debt used in the computation of WACC is 13%*(1-.28)= 9.36%. There was no much long-term Debt in the Balance Sheet for Cashbuild, the only long-term debts which were there were longterm interest bearing of R2 472 000, which gave a cost of debt of 47%(interest charge/cost of debt). This meant that some of the interest charge related to current liabilities(since the largest chunk of debt was short term in the form of current liabilities) for there to be such an unreasonable interest charge. There since this was unrealistic, l settled for a cost of debt of risk free rate(12%) plus a premium of 1%. This is because that is generally what Bank and lender, on average, do charge.

Terminal growth rate of cash flows The terminal growth rate used in the discounted cash flow valuation is the terminal sales growth at the end of the forecast(2023). Since the Sales growth became constant from 2022 onwards at 2%, this means this will approximate the Sustainable Constant Growth of Cash inflows. Again since Sales figures in the discounted cashflow model are Nominal, it means they incorporate inflation and therefore the sales growth rate(2%) incorporates inflation.

Discounted Cash Flow Model Variables The forecast period is from 2014 until 2023 with 2023 being the base for the terminal value. Sales and sales growth

As explained in the company prospects section, Cashbuild is to expand its operations by opening new branches, new shops across Africa with a focus on upgrading and also increasing customer transactions. Cashbuild also intends on increasing its footprint within South Africa by providing the more economically middle class customers with access to their stores and building materials. However, the turbulent economic hardships will cut down on the expected growth in sales percentages due to declining Real Disposable incomes.This, according to Cashbuild CEO and the Cashbuild’s integrated report is likely to see Cashbuild’s sales

y = 0.2435x + 0.0115 R² = 0.0196

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0%

CSB

CSB

Linear (CSB)

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increasing steadily year on year, but sales growth rate declining in the medium term as shown in the graphs; Sales Growth%

Cost of Sales The level and change in cost of sales at Cashbuild will be a function of the producer price inflation as well as the operational efficiency levels that Cashbuild aims to achieve through the opening of its new ten stores yearly. However, once Cashbuild has control over its supply chain, establishing relations with suppliers(as stated in the CEO report) and begins purchasing goods from inexpensive local producers, the percentage Cost of sales is expected to remain constant: Cost of Sales Percentage

As such, the actual costs of sales in the forecasted years are forecasted to behave as illustrated below. The increase in the actual cost of sales is expected to follow a decreasing exponential pattern as the sales forecasts as shown below: Forecasted Actual Cost of Sales

Property, Plant and Equipment and Depreciation With the planned African growth programme in place as established by Cashbuild to increase stores every year by an average of ten, the amount of expenditure on capital assets is expected to increase relative to the increasing sales.

PPE% of Sales

0%

2%

4%

6%

8%

10%

12%

Sales % growth

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

-

1,000,000,000.00

2,000,000,000.00

3,000,000,000.00

4,000,000,000.00

5,000,000,000.00

6,000,000,000.00

7,000,000,000.00

8,000,000,000.00

9,000,000,000.00

10,000,000,000.00

1/1

/20

09

1/1

/20

10

1/1

/20

11

1/1

/20

12

1/1

/20

13

1/1

/20

14

1/1

/20

15

1/1

/20

16

1/1

/20

17

1/1

/20

18

1/1

/20

19

1/1

/20

20

1/1

/20

21

1/1

/20

22

1/1

/20

23

Actual Turnover forecasts

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

1/1/2023

75%

76%

76%

77%

77%

78%

78%

79%

79%

80%

Cost of products Sold as a % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

-

1,000,000,000.00

2,000,000,000.00

3,000,000,000.00

4,000,000,000.00

5,000,000,000.00

6,000,000,000.00

7,000,000,000.00

8,000,000,000.001

/1/2

00

9

1/1

/20

10

1/1

/20

11

1/1

/20

12

1/1

/20

13

1/1

/20

14

1/1

/20

15

1/1

/20

16

1/1

/20

17

1/1

/20

18

1/1

/20

19

1/1

/20

20

1/1

/20

21

1/1

/20

22

1/1

/20

23

Actual Cost Of Sales forecasts

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

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With respect to the depreciation expense, relative to the property, plant and equipment, there is expected to be only slight variability in the ratio as no significant changes are expected in Cashbuild’s accounting policy relating thereto:

Depreciation/PPE

Selling, general and administrative expenses In the 10-year forecast period, there is expected to be an increase in the level of general and administrative expenses. This is due to a number of factors which include the inflation during the period under review, higher labour costs as more employees are hired and as labour laws in foreign countries become more stringent as well as a higher level of bad debts as companies within the Cashbuild group begin to sell more on credit:

Cash and Interest Income Cashbuild is largely a cash-based group because there is an increase in sales by (1.1%* 6 376 945)= R70 146 000 while debtors only increased by R30 273 000, this means the majority of the sales are on Cash. With the expected increase in the number of stores to be opened in the future and consequently the higher cash sales, it is expected that the cash balance as a percentage of sales will increase. Also, less of the operational cash is expected to be used to finance capital expenditure as Cashbuild has recently had a long term interest bearing debt and a large chunk of short term financing in the form of current liabilities.

0%

2%

4%

6%

8%

10%

12%

Net PPE/Sales %

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

7%

7%

7%

7%

8%

8%

8%

8%

8%

9%

Depreciation/PPE

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

14%

15%

15%

16%

16%

17%

17%

18%

Selling ,General and Administrative Expenses as % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

0%

5%

10%

15%

20%

25%

30%

Interest income Rate/Cash and Equivalents

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

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1/1/2022

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Taxation expense, Taxation receivable and Taxation payable The taxation rate is expected to remain at 28% with insignificant variations in the forecasted years. Secondary tax on companies is no longer applicable and as such dividends paid by Cashbuild will not affect the effective tax rate. The taxation receivable as a percentage of income tax is forecasted to remain fairly constant. This balance is most likely to comprise of input VAT that Cashbuild is entitled to.

Cashbuild has a history of high taxation payable balances. This trend is expected to continue given the history as well as the fact that Cashbuild is legally permitted to defer payment of its tax liability under the Income Tax Act.

Retention ratio The retention ratio of Cashbuild has been within the 60% and 70% range. It has thus been forecasted to stay within this range as the dividend policy of Cashbuild is not expected to deviate from its past trends.

Accounts receivable Cashbuild is in the process of opening new stores and increasing customer transactions and credit facilities for customers. This will see accounts receivable as a percentage of sales gradually increase:

Inventory As the number of Cashbuild stores increases, the level of inventory on hand at the end of each financial year is expected to increase accordingly to accommodate the escalating sales. However inventory levels for all stores will remain manageably within the expected range due to Demographic surveys that the company keeps on conducting and also since the construction Industry is a Job production-kind of Industry, where Material is only acquired on demand:

0%

2%

4%

6%

8%

10%

12%

14%

Cash and Cash Equivalents as a % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

0%

5%

10%

15%

20%

25%

30%

35%

40%

Income taxes payable (as a % of Income tax)

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

0%

10%

20%

30%

40%

50%

60%

70%

80%

Retention Ratio

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

Accounts Receivables as a % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

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Accounts Payable Cashbuild procures a significant amount of its inventory on credit(as shown by the higher increase Current liabilities in the Balance Sheet, which are actually higher than long term debts). With the increased demand for stock that will be generated as a result of the new stores being opened, the accounts payable balance as a percentage of sales is expected to increase. Once Cashbuild begins purchasing its stock from cheaper local suppliers, creating relations with supplier in the Channel of distributions ,as stated in the CEO report,it is forecasted that the ratio will begin to decrease slightly.

Issued Share Capital This report has been prepared on the assumption that Cashbuild’s issued share capital will remain unchanged at the 2013 level, that is 22,743,000 shares.

Dividend Discount Model The dividend payout ratio has historically been within the 30% to 40% range. This practice is expected to continue into the future. In forecasting future dividends, the forecasts were based on the projected net profit after tax. The dividends were then discounted at the cost of equity of 13.46%. Dividends in the long-term were estimated to grow at the long-term growth of free cash flows of 2% and were also discounted to the valuation date of 19 July 2014 at the cost of equity. Net Asset Value In estimating the value of the Cashbuild shares using the net asset value, the estimated equity balance in 2014 of R1,308,660,004.61 was divided by the number of shares in issue(22743000).

Price/Earnings Ratio The price-earnings ratio is the relationship between the market share price and earnings per share of a company. This report has estimated the price/earnings ratio of Cashbuild to be 13.69 (per the McGregor BFA Database). Determining the value of the shares, an estimation of the sustainable earnings in 2014 was made through an adjustment of the net profit after tax for non-recurring items. The value of ordinary shares was then the product of the said sustainable earnings (R 302,467,676.65) and the price/earnings ratio.

VALUATION OF THE CASHBUILD SHARE Discounted Cash Model This model valued the Cashbuild share to be R104.42 at 19 July 2014. In arriving at this figure, the core present value was determined to be the sum of the present value of the forecasted free cash flows is R 1,424,412,366.38 ,while the present value of the terminal value is R 952,901,732.44. After adjusting for debt and cash and cash equivalents, the total value of equity was calculated to be R 2,374,826,098.83. This is lower than the trading price of R 131.05. As such, this model suggests that the share is overweight relative to the JSE.

Reliability of the Discounted Cash Flow Model A comparison of the share value computed by the model was made to the actual share prices of and the differences found were not majorly significant. These points to the notion that the forecasts made in the model are reasonable.

Dividend Discount Model The value placed on the Cashbuild shares by the dividend discount model is R50.60 which is again lower than the current price. Cashbuild has been paying dividends consistently for a number of years and thus a great deal of reliance can be placed on this valuation especially for minority shareholders.

Net Asset Value Measuring the value of the Cashbuild share using the projected net asset value as a measure also points to the notion that the JSE is overpricing the shares. This method placed a value of R 57.54 on the shares. However, this is a pure accounting measure and is affected by the choice of accounting policies of Cashbuild.

Price/Earnings Ratio The product of the forecasted sustainable earnings per share and the PE ratio stated the value of the Cashbuild share to be R 182.07. This figure is far from the approximation of the trading price of the Cashbuild share in the market, mainly because of the different , adequacy and completeness of all the adjustments to profits to get sustainable earnings and the interpretations thereof.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Inventory as a % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

1/1/2020

1/1/2021

1/1/2022

0%

5%

10%

15%

20%

25%

Accounts payable and accrued expenses as % of Sales

1/1/2009

1/1/2010

1/1/2011

1/1/2012

1/1/2013

1/1/2014

1/1/2015

1/1/2016

1/1/2017

1/1/2018

1/1/2019

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1/1/2021

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CONCLUSION AND RECOMMENDATIONS

All of the valuation models used provided a basis for concluding that the Cashbuild share is current trading at a price that is above its true value(except PE Valuation). Consequently, it is the recommendation of this report that investors should not purchase Cashbuild shares at their current price as it is likely to decrease in the near future. Also, investors with Cashbuild shares in their portfolios should dispose of them However, Cashbuild does have a high dividend yield and thus shareholders who are reliant on the dividends should continue to hold on to these shares. Cashbuild shares are defensive stocks and thus will continue to yield dividends even during recessionary periods. Furthermore, on a non-financial front, Cashbuild is about to embark on an expansion programme that will most likely see it operate as the biggest retailer in the region (SADC). With these growth prospects on the horizon, it is probable that holding on to the Cashbuild shares could provide the shareholder with substantial capital returns.