Seven Group Holdings Ltd (ASX: SVW) is a $2.3 billion diversified mining services and investment company controlled by billionaire Kerry Stokes.
This week's full year results were tepid as expected. Amongst its array of businesses is a number of leading Caterpillar heavy earth moving equipment franchises. The demand for sales of new equipment has obviously declined significantly since the onset of the resources sector slowdown and this has been the main burden on the group.
Results:
- Revenue fell 35% to $3 billion
- Underlying profit fell 37% to $253 million
- Underlying earnings per share fell 39% to 74 cents
- Total fully franked dividend remained unchanged at 40 cents per share
Highlights:
- As discussed here, Seven West Media Ltd (ASX: SWM) – a company in which Seven Group has a 35.3% shareholding – produced a respectable set of results and continues to provide Seven Group with a non-resources sector related stream of income
- Seven Group's investment portfolio outperformed the S&P/ASX 200 Index (INDEXASX:XJO) and is currently valued at $916 million
- An on-market share buy-back has been launched to take advantage of the beaten-up share price
Buy-and-hold
Admittedly the outlook for Seven Group's operations remains constrained with management providing guidance that they expect FY 2015 earnings to be flat year-on-year. Whilst investors of course prefer to hear that growth will be strong, what really matters is if there is an opportunity to profit from a discrepancy between price and value.
With the stock trading on a price-to-earnings ratio of 10.2x and boasting a fully franked dividend yield of 5.3%, provided the group can maintain the current level of earnings as it is forecast to do so, then investors could arguably comfortably buy today. This would allow them to enjoy an above average yield and wait patiently for earnings growth to return.
