It is Time to Buy Sun International
Figure 1: Sun International ten Year Share Price on the JSE.
Looking at the company’s ten year equity prices, figure one shows that the shares have gained 159.7% over the past ten years. The dividend yield currently stands at 1, 7% and earnings yield 4, 62%, and the price earnings ratio 21.63. The stock is currently undervalued with potential future earnings potential and thus offers a lucrative investment opportunity. The 52 months highs and lows have seen the share price move from a low of R86, 5 52 weeks ago to R128, 0 currently. However according to standard bank equity analyst the stock is still underpriced with great earning potentials as illustrated on table one.
Table 1: SUI Valuation
06 Jun 2014
|30 Jun 2015||30 Jun 2016|
|Earnings Yield %||7.60||9.00|
|Dividend Yield %||3.01||4.48|
Table one shows that the dividend per share, earnings per share, earnings yield and dividend yield all showing significant growth potentials into the future.
Though Sun International presents a great investment opportunity, there still exist risks of depressed growths in South Africa due to general economic slowdown in the economy with growth rates revised downward from 2.7% to currently 1.4% for 2014. Infrastructure and other regulatory challenges continue to constrain growth for the group in other parts of Africa. Increased operational costs pose another challenge to the investment thesis for the group.
I would say, Sun International remains a strong buy stock with huge growth potentials within South Africa and globally. Its current valuation shows great future earnings and growth potentials. Investors interested in owning a share of the tourism industry in Africa may want to have a close look at sun international.
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