It is Time to Buy Sun International
It is time to buy sun international
Vivian Atud
Investment Thesis
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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
As at: 06 Jun 2014 |
30 Jun 2015 | 30 Jun 2016 |
DPS cents | 370.00 | 550.00 |
EPS cents | 934.00 | 1106.00 |
PE | 13.15 | 11.11 |
Earnings Yield % | 7.60 | 9.00 |
Dividend Yield % | 3.01 | 4.48 |
Source: www.standardbank.co.za
Table one shows that the dividend per share, earnings per share, earnings yield and dividend yield all showing significant growth potentials into the future.
Risks
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.
Conclusion
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.
Disclaimer: Information and sources in this document are from sources believed to be reliable, but cannot be guaranteed due to the nature thereof. Information contained in the report should not be construed as financial advice. Professional financial advice should be sought before any course of action is pursued. Atud and Associates (Pty) Ltd t/a Sunburst Africa shall not be responsible and disclaims all liability for any loss, liability, damage (whether directly or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use or of reliance upon any information contained in this report. The company, directors and staff may from time to time have interests in the shares mentioned in this report. Sunburst Africa is a Division of Atud and Associates- A Registered Financial Services Provider. www.atudandassociates.co.za, Tel: 0110786607, info@atudandassociates.co.za, info@sunburstafrica.co.za.