The recently listed Beacon Lighting Group Ltd (ASX: BLX) may be of interest. It’s shares were way oversubscribed in the IPO and its share price went up 60% on listing. However, we still see good value at current prices.

Beacon Lighting service the middle to upper range of residential clients and have an integrated operation, with over 90% of their products being designed, manufactured under license, distributed and retailed by themselves. A few years ago BBC hardware tried to take them on, but recently gave up (presumably not being able to equal the range and service provided by Beacon). Customer loyalty is strong. They also have a new solar division which could prove to be a whole new profit centre. This, their emphasis on energy efficiency and the promotion of fans over air conditioning makes them slightly green for some people.

Profit is average with Earnings Yield of 5% (PE of 20), Operating Cashflow Yield of 5.6% and Return on Equity a solid 15.4%. However, the growth in all these metrics has been solid. Profit is projected to be up 21% in the current year and Cashflow 25%. One negative is the low Net Tangible Assets per share of just 14c compared to a shareprice 7.5 times greater. They rent most of their premises, including renting retail outlets from the family of the owners of 55% the shares. This is supposedly under an arm’s length arrangements, but it is not a good look.

Even discounting Beacon for this possible conflict of interest and for the fact that they are a newly listed company (time may reveal more about them, both good and not so good) they still come out as a value investment up to $1.25 per share. We purchased shares at the current price of $1.07.

Nothing on this website is advice, everAugust Investments owns shares in Beacon Lighting, and Claude Walker owns shares in August Investments.

nihal  7 years, 5 months ago Reply

company done well in just a week of listing, but one wonders how much growth is now in the share price
its a very small company - only $150m sales and a niche area that is vulnerable to the majors competing(WOW, WES hardware operations)
very mature economy now so i don't think its store target is realistic.

Claude Walker  7 years, 5 months ago Reply
7 years, 5 months ago Reply

Thanks for your comment Nihal. I think you have a point about the hardware operations. Having said that, if the property market stays hot, then there will be a a fair few renovations, and construction is likely to pick up.