CA Sales Holdings, good for dividend or value investing

Good morning 😃🌞☀️, let’s get into it.

We are continuing our series of whether a company is good for dividend or value investing and this time looking at CA Sales Holdings.

Keep in mind that CA Sales Holdings has a dual listing in the BSE and JSE markets.

Scope & Data: We use the latest audited FY2023 results and available FY2024 updates (including the H1 2024 report and FY2024 results) to ensure current insight.  We draw on both Botswana Stock Exchange (BSE) and JSE disclosures, since CA Sales (ticker CAA on JSE, CAS on BSE) is dual-listed . Data sources include the company’s annual reports and press releases for FY2023–FY2024, as well as financial statements.

Business Model

CA&S is a route-to-market FMCG distribution group.  It provides warehousing, logistics, retail execution (sales and merchandising), shopper marketing, and data/technology services to brand principals across Southern and East Africa .  The company’s focus is on ensuring on-shelf availability of leading consumer brands across hundreds of retail outlets.  In FY2023 the group served over 35,000 outlets with 500+ product lines, covering categories from food and beverage to personal care and household goods .  The diversified services span sales & merchandising, distribution, warehousing, retail support, and training, often bundled in joint business plans with global consumer goods companies .  This multi-channel model (including cash van operations) aims to leverage scale across Botswana and other African markets.

Management Capability

CA&S’s leadership team has deep FMCG experience.  CEO Duncan Lewis (appointed CEO 2019) has been with CA&S since 2003 and led Pack ‘n Stack (a predecessor) from 2013 .  CFO Frans Reichert has managed CA&S finances since 2012 (CFO since 2018) .  The board includes seasoned executives and regional experts: for example, Chairman Johan Holtzhausen has decades of M&A and cross-border transaction experience, and director Blackie Marole was CEO of Botswana’s Debswana mining company .  Overall, management emphasizes strategic growth and local market knowledge: the CEO notes the results “testament to our focus on strategic growth, operational efficiency, and market expansion” .  Collectively, the team’s background in FMCG distribution and finance suggests solid execution capability for the group’s expansion plans.

Historical Free Cash Flow Growth

CA&S has generated steadily rising operating cash flow.  In 2023, cash generated from operations was R342.3m (vs R276.5m in 2022) . After capital expenditures (~R70.9m in 2023), free cash flow remained robust.  The group’s cash balances climbed sharply: year-end cash and equivalents were R1,061.9m in 2023 (up from R735.8m in 2022) .  This growth in liquidity reflects strong collections and cash management.  Over FY2022–FY2023, operating cash flow rose ~23% while capex grew ~40%, yet the net cash increase (~R312m) demonstrates healthy free cash generation .  Such free cash has funded acquisitions and dividends (see below).  In summary, the company’s historical cash flow profile is strong and improving, indicating good funding for reinvestment and shareholder returns.

End-Market Exposure (Botswana & African FMCG)

CA&S’s core markets are Botswana and other Southern/Eastern African countries.  It operates in Botswana, Namibia, South Africa, Zambia, Zimbabwe, Eswatini, Lesotho, Mauritius and others .  These economies are resource-driven but support steady FMCG demand.  For example, Botswana’s economy (dominated by mining) is maturing, yet per-capita incomes remain among Africa’s higher levels, supporting retail growth.  South Africa (around 60% of CA&S’s revenue) is the region’s largest consumer market, with FMCG sales ~R845 bn annually (roughly 20% of retail).  Management notes that GDP in most CA&S markets is forecast ~3%, and investments in infrastructure/diversification are underway .  The African consumer base is large and growing (urbanization and rising incomes), so demand for packaged goods is expected to expand.  CA&S leverages this by partnering with ~200 brand owners (Kellogg’s, Tiger Brands, Mondelez, etc. ) to penetrate modern and informal retail channels.  The company’s mid-2025 acquisition of a stake in Tradco (Kenyan distributor) exemplifies its push into high-growth East African markets .  Overall, the end-market is broad (multi-country, FMCG sector) and growing, though subject to regional economic cycles and retail competition.

Main Risks

Key risks for CA&S include:

• Macroeconomic volatility: As management admits, “instability of the global economy and persistent supply chain disruptions” are challenges .  Weakening consumer demand or inflation can pressure sales and margins.

• Currency risk: Operating across multiple currencies (Botswana Pula, South African Rand, Zambian Kwacha, etc.) exposes profits to exchange swings.  While local currency weakness might boost export-style revenue, it can inflate imported input costs.

• Client concentration: The business depends on a portfolio of large brand principals.  Any decision by a major client to change distributors or reduce inventories could hurt revenue.

• Integration of acquisitions: Rapid acquisitions (e.g. Namibia’s T&C Group, MarketMax, Roots Sales, Tradco) pose integration risk. Cultural/operational missteps could lower expected synergies.

• Competitive/disruptive risks: Emergence of e-commerce or direct-to-retailer models might challenge route-to-market incumbents.  If large multinationals build their own African sales networks, CA&S could lose business.

• Operational exposures: Logistics (warehousing, transport) across Africa can be disrupted by infrastructure issues, political unrest, or regulatory changes.  Effective execution is vital.

Despite these risks, the diversified services (covering formal and informal trade) and a “balanced portfolio of service solutions” provide some resilience. Management’s focus on “resilient product portfolio” and disciplined costs is intended to mitigate these threats.

Balance Sheet Health

CA&S’s balance sheet is conservatively strong.  By FY2024, total assets were R5.65 bn (up 9.6% YoY) , funded by equity R3.24 bn and liabilities R2.41 bn .  The equity base is large relative to debt: total interest-bearing borrowings were only ~R743m (R326m non-current + R417m current) , versus equity of R3.24bn.  At end-FY2024, cash & equivalents ~R1.17bn provided ample liquidity .  This implies a low net-debt position (~R(43)m if offsetting debt vs cash).  Gearing (debt/equity) is modest (<25%).  In the FY2023 report, directors explicitly state they have “adequate resources” and deem the group in a “sound financial position” .  Working capital is manageable: current liabilities include ~R1.42bn in payables, but this is matched by inventory and receivables (not shown here).  In sum, the balance sheet appears healthy with conservative leverage and strong cash reserves, supporting operational needs and dividend funding.

Capital Allocation Strategy

The group balances growth investment, dividends, and prudent financing.  Acquisitions and reinvestment are a clear priority: recent examples include the 100% acquisition of Namibia’s T&C Group (R65m) and Pharma-channel MarketMax (R11.5m) in 2023 , a 49% stake in South Africa’s Roots Sales (R70m) in 2024 , and the Kenyan Tradco deal (2025).  These moves broaden channels (e.g. into informal trade) and geographic reach .  Dividends are paid only annually from reserves, at a fixed 20% of headline earnings policy .  The final FY2023 dividend was 19.56c (maintaining 20% payout) , and FY2024’s was 24.44c (24.9% increase in line with higher earnings) .  This implies a moderate payout ratio; roughly 80% of profits are retained for reinvestment or debt reduction.  The group did minor share buybacks only to clean up odd-lot holdings (~R0.7m in 2023 ), not large-scale repurchases.  Equity issuance to fund acquisitions has been minimal (e.g. 2023 share issue to minorities in a subsidiary).  Financing has been a mix of cash and debt: borrowings rose to support capex/acquisitions, but ample cash build-up has reduced net leverage in 2024.  Overall, CA&S exhibits disciplined capital use: it grows via targeted acquisitions, maintains a conservative dividend ratio, and avoids aggressive buybacks, keeping optionality for future investments.

Past and Projected Growth

Historical growth has been robust: In FY2023, revenue reached R11.32 bn (up 19.4% YoY) . Net profit grew 59.7% to R604.5m (driven by a R123m bargain purchase gain) , and headline earnings rose 28.0%.  FY2024 saw continued expansion: revenue rose +10.6% to R12.52 bn, and headline earnings jumped +25.9% to R585.3m .  Even adjusting for one-off 2023 gains, underlying operating profit and EPS improved ~25% .  Mid-2025 trends indicate resilience: H1 2025 sales were R5.96 bn (+4.0% YoY) with HEPS +16.1% .  This slower revenue growth (vs ~9–10% earlier) likely reflects macro headwinds, but profitability and cash flow remain strong.  Management attributes growth to “organic growth, expansion into new regions, and acquisitions” .  Looking ahead, CA&S is optimistic: it highlights East African growth via Tradco and notes favorable demographics in southern/East Africa .  However, forecasts must account for economic headwinds (e.g. potential weaker South African demand).  No independent analyst consensus is provided here, but the company’s strategy suggests moderate continued growth in revenue and profits, likely single-digit top-line growth but double-digit EPS growth if margins hold.

Dividend Sustainability

CA&S maintains a conservative dividend policy, suggesting sustainability.  The 20% payout of headline earnings means dividends grow mainly when earnings do .  For example, FY2023’s final dividend was 19.56c (up from 15.35c in FY2022) . FY2024’s final dividend rose to 24.44c (a +25% increase) .  Given reported EPS (HEPS) growth, these increases kept the ~20% ratio.  Since interim dividends are not paid, only one distribution occurs yearly after results.  Importantly, the low payout ratio (20%) leaves ample retained earnings as a buffer.  Cash flow is robust (see above), covering both capital needs and dividends with surplus.  At the current share price (~R18), the forward yield is only ~1.3% , meaning CA&S is not a high-yield stock.  However, the rising dividends combined with low payout ratio imply the policy is sustainable: as long as earnings remain strong, dividends can continue growing.  Minor risk: Botswana vs South African withholding tax differences (BSE shareholders face 15% WHT, JSE 20%) affect net yield, but this does not alter sustainability.

Current Valuation and Value Assessment

As of late 2024, CA&S’s valuation metrics suggest a fair-to-growth pricing.  The stock trades around 13–14× earnings . (Trailing EPS ~130c, with last close price ~R18 gives P/E ≈14.)  Its dividend yield is low (~1.3–1.4% ) because of the modest payout ratio.  Price/book is roughly 2.5× , reflecting solid asset backing and goodwill from acquisitions.  These multiples compare moderately: e.g. competitors in South African retail/distribution have P/Es ~9–20.  CA&S’s P/E is lower than some domestic retailers (P/E ~17–19 for peers), yet higher than strictly defensive sectors.  In value terms, a 13–14× P/E is not particularly cheap, but given CA&S’s double-digit earnings growth, it could be justified.  For a dividend investor, the low yield may be unattractive; however, if one values the growing yield (projected via rising dividends) plus retained earnings backing, it can be acceptable.  Key to a value thesis would be whether the market has fully priced in the earnings growth potential. At current levels, CA&S appears to offer reasonable value considering its growth and cash-flow profile, but it is not an obvious bargain on yield alone.

Conclusion: CA&S has a diversified FMCG distribution model with demonstrated growth and strong cash flow, backed by experienced management. Its risks are typical of regional distributors (economic swings, currency, client turnover), but its balance sheet is solid. For a value or dividend investor, the stock’s fundamentals are sound: moderate valuation, growing dividends, and room for reinvestment suggest it could be a good candidate. However, its low yield and market-based multiples mean it’s more a growth-at-a-reasonable-price play than a high-yield income stock.

Sources: Company annual reports and media releases (FY2023 and FY2024) , company website , and market data .