INVESTMENT CASE - CASHBUILD LTD (CSB)

Cashbuild is one of the fairy tale stories of the JSE. With the perpetual uptrend of its share price and continuous expansion of its operations, it really does belong in every well balanced portfolio. Cashbuild is well positioned and reads the market well, thereby always having a good product mix available to customers.

CSB - Weekly Chart

Cashbuild is South Africa's fastest growing retail building materials suppliers. It sells building and other related materials to the Bakkie-Builder market as well as the DIY market on a cash only basis. In other words, small scale building projects and home expansions form the basis of its business and all purchases that customers make are paid for by cash. An interesting observation here is; with the rapid growth of the lower income brackets, aided greatly by the aggressive pay rises often sought by trade unions, their business is growing rather quickly. Often what member of this income bracket will use their 12% salary increase to improve their living conditions. This means that they do a fair amount of home expansions and renovations, thus becoming customers of Cashbuild.

Cashbuild recently reported an increase of 11% in revenue complimented by a 25% increase in Net Asset Value, 88% increase in Headline Earnings and 96% increase in Dividends. With Earnings per share at R12.57, a Dividend Yield of 3.65, P/E ratio of 12.2 and great earnings growth potential, we see the fundamental value of this stock at R221.50. This then means that the stock is trading at a 42% discount to what it is worth right now. 

CSB - Daily Chart

Buying at R150.00 would be the ideal scenario, but anywhere between R150.00 and  R155.00 would suffice. There are two stoplosses indicated above; the first at R145.00 being for the more aggressive traders, and the second at R135.00 being for the longer term investors. Note that in both cases, the price would have to close below those prices for two consecutive days before the stoploss is triggered. Look to take profit when the share reaches its fundamental value price of R221.50.