CMH is running out of gears (JSE: CMH)

Bloodshed in the car dealership industry

I’ve been writing about the disruption in the car industry so much that I’m almost bored of it. Almost. Sadly, it’s a very important topic, as evidenced by this chart of the CMH share price:

The latest plunge isn’t just because of the pain in the markets from Trump tariffs. CMH released a trading statement reflecting a drop in HEPS of between 20% and 30% for the year ended February 2025. This means they expect HEPS for the year of between 379.3 cents and 433.5 cents.

The share price of R27 is a Price/Earnings multiple of 6.7x. I’ve gotta tell you – that still feels high to me in this environment.

A huge jump in earnings at Purple Group (JSE: PPE)

They are enjoying the juicy part of the J-curve now

The J-curve is a lovely, descriptive thing. Just look at the shape of a capital J. This web font isn’t doing it justice, so imagine a deeper curve at the bottom. This reflects the initial journey for a startup, with extensive investment and losses as the foundational steps in the business are taken. At a point in time, things finally turn and an uptick in revenue leads to major growth in profits.

The latest Purple Group trading statement reflects a massive jump in HEPS for the six months to February 2024. They expect to be up between 194% and 213%, coming in at between 2.29 cents and 2.44 cents. Seeing a growth rate like this on the J-curve isn’t uncommon, hence why I’ve given that context.

Here’s the thing though: the share price knows about the J-curve. Purple Group is trading at just over R1 a share. If you double the current earnings to get an annualised view, the forward Price/Earnings multiple is around 21.5x. For a growth asset on the JSE, that’s not unheard of.

Generally, volatility is good for brokerage businesses. This could be a strong year for them.

Nibbles:

• Director dealings:
  • The CFO of Glencore (JSE: GLN) loaded up, buying a whopping R32 million worth of shares. I double and triple checked – the announcement puts it forward as an on-market acquisition, not a share-based award.
  • A director of Momentum Group (JSE: MTM) bought shares worth R198k.
  • A director of Ascendis Health (JSE: ASC) bought shares worth R98k.
  • Des de Beer bought another R82k worth of shares in Lighthouse Properties (JSE: LTE). If you’re new around here, the reason I mention de Beer by name is that he buys a lot of shares.
  • A director of York Timber (JSE: YRK) bought shares worth R45k.

• Regular readers will know that Novus (JSE: NVS) is fighting with the Takeover Regulation Panel (TRP) about the process related to the mandatory offer to Mustek (JSE: MST) shareholders. The TRP recently withdrew its approval of the firm intention announcement for the offer. Novus has filed an urgent application in the High Court to set aside the TRP’s ruling. This will be heard on 22 April.

• Southern Palladium (JSE: SDL) presented at the PGM industry day in Joburg. If you would like to dig into the company and get an overview of what they are all about, you’ll find it here.

• Although I doubt it makes any difference to equity holders at this stage, it’s worth noting that the Tongaat Hulett (JSE: TON) business rescue process is still dealing with legal challenges. Specifically, RGS Group is still trying to stop the implementation of the plan in its current form.