Santova Logistics

Stock Research Report

Company Name: Santova Logistics 

Ticker: SNV

Market Capitalisation: R1.03b

Share Price: R7.45

Industry: Logistics / Supply Chain Management

Company Overview

Santova provides logistics solutions in Africa, Asia, the United Kingdom and Europe. They offer solutions such as customs and excise clearing, warehouse management, freight forwarding, transport management solutions, vessel chartering solutions as well as various other services. Santova is a fourth party logistics provider. Fourth-party logistics, also known as 4PL, is an operational model in which a business outsources its entire supply chain management and logistics to one external service provider.

Investment Thesis Summary

Santova have disrupted the SA logistics market through the use of tech enabled logistics solutions and offer creation at all stages of the supply chain. Santova are an asset light business and do not own their own fleet of trucks or ships and are thus able to scale in order to meet demand levels and have a low fixed cost structure. 

Key Risks

• Santova have an aggressive acquisition policy to meet expansion needs and face the risk of overpaying for an acquiree
• More than 65% revenue is generated offshore and there is a risk that a strengthening of the rand will impact margins 
• Shipping and freight industry is highly cyclical

Financial Performance and Financial Position

• Revenue has grown from R432m (2020) to R633m (2022)  over the last three financial periods
• Exceptionally high profit margins for the trailing 12 months
  • Gross margin: 93%
  • Operating margin: 43%
  • Net margin: 31%
• Financial leverage has been improving 
• High interest coverage ratio (55)
• Low debt to equity as there is minimal long-term debt on the balance sheet, only an overdraft facility of R226m, there is however sufficient cash on hand to settle this debt if needed

Key Metrics

ROA: 11.50%

ROE: 24.57%

ROIC: 17.51%

Price / Sales: 1.48

P/E: 4.77

P/FCF: 7.42

P/B: 1.12

5 year average earnings yield: 16.22%

EV/EBIT: 3.22 (5 year average: 5.65)

EV/EBITDA: 3.00 (5 year average: 5.36)

Valuation

Simply Wall Street DCF Fair Value: R8.71

FinBox DCF EBITDA Exit Multiple Fair Value: R13.93

FinBox DCF Revenue EXIT Multiple Fair Value: R11.67

FinBox EV/EBITDA Fair Value: R11.06

FinBox P/E Fair Value: R10.18

FinBox P/B Fair Value: R8.94

FinBox P/S Fair Value: R8.11

Average Fair Value: R10.37

Margin of Safety Discount: 20% (small cap in cyclical industry)

Adjust Fair Value: R8.30

Expected Return: 15.30%