One year ago, I told Red Hot Penny Shares investors to grab shares in Bell Equipment.
I told investors that: “Bell Equipment released results for the year ended 30 June 2023 and the company had a smashing year!
Revenue soared from R4.2 billion to R6 billion, with profit for the period jumping from R210 million to R348 million.”
So what’s going on with the company – and where is it headed from here?
Bell Equipment just shot up 43% in the past three months!
Bell shot up 43% in the past three months, and around 53% in the past year.
The company’s latest trading statement should give you a glimpse into the reasons behind this big jump in share price!
You see, on 7 November 2023 Bell announced the following:
“Shareholders are advised that the Company expects to report earnings per share and headline earnings per share of at least 750 cents, an increase of 272 cents per share or 57% and of 277 cents per share or 59% respectively, for the year ending 31 December 2023 when compared to the earnings per share and headline earnings per share of 478 cents and 473 cents respectively for the year ended 31 December 2022. A further trading statement for the year ending 31 December 2023 will be released on SENS once the Company has greater certainty regarding the extent of the expected increase in its results for the year ending 31 December 2023.https://fspinvest.co.za/red-hot-penny-shares/
The expected increase in earnings is mainly due to stronger market demand.”
What do these numbers mean for Bell Equipment?
If Bell reports earnings per share at 750c, it means the stock trades on a rock-bottom PE ratio of only 3.07.
The JSE average for comparison is 10.34.
At these profits Bell’s share price could rise to R75 per share – or 226% and it would still only be on a PE of 10, or the JSE average!
Looking at the company’s underlying value could be another way of considering what upside potential is. In June 2023 when it reported interim results the company penned net asset value per share (NAV/share) at R51.34 – that’s more than 120% higher than the current share price.
International competitors could still be interested in Bell
Bell is one of a handful of manufacturers worldwide that can produce articulated dump trucks (ADT) – which are trucks that work alongside excavators in the mining and construction industries.
Many of its largest competitors DO NOT produce 30 ton+ ADTs but would like to. This includes companies like Hitachi, JCB and Kobelco.
Estimates are that JUST Bell’s ADT business is worth more than R25 a share.
That means the rest of the business would be FREE to a competitor.
Add in the low PE ratio, high net asset value, and Bell is a huge takeover target as well.
Looking at international competitors like Caterpillar (13.31), John Deere (10.91), Komatsu (8.8) and the like – they trade on average at a PE ratio of 11. That’s more than THREE times Bell’s valuation.
That means these kinds of companies could acquire it for double its current price and still add massive value to their bottom line…
Even at its current share price – Bell is definitely a stock to keep an eye on. If you want to be the first to hear about stocks like this, then join my private investor group here.
PS. Red Hot Penny Shares has had another great year in the markets. If you’re keen to find out what it’s all about and how to get started investing in small cap stocks, then join now.
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