Commercial equipment leasing business Silver Chef Limited (ASX: SIV) is holding up better than most after management unveiled a better-than-expected profit result for 2015-16.
If shareholders are disappointed that the stock gave up 0.9% to trade at $8.09 on the news this afternoon, they should look at the 3.6% carnage on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with panicky investors wiping more than $50 billion off the value of our share market.
A 0.9% fall is really a good outcome and reflects "optimism" over Silver Chef's 22% net profit growth to $15.5 million as revenue jumped 21% to $171 million for the year ended June 30, 2015.
The bottom line was 2.5% ahead of consensus, while sales were 3.2% above the average analysts' estimates on Reuters.
It may be a modest difference but investors should treasure every small win, particularly given that companies with high double-digit growth results are becoming increasingly hard to come by.
What's more, management's decision to pay a 20 cent final dividend to take its fully franked distributions to 36 cents a share is another win worth celebrating. Most analysts were only expecting a dividend of 32.7 cents a share.
Shareholders will also be pleased that Silver Chef's problem prone GoGetta appears to have turned a corner with the division's revenue surging 31% to $57.4 million, while its traditional core hospitality equipment rental business grew by a more modest 16% to $110.1 million for the year.
GoGetta focuses on equipment leasing solutions to the transportation and construction sectors and management said it only has a small share of a deep market, which is seeing growing appetite for flexible finance options.
On the other hand, its hospitality business is experiencing increasing competition and that's prompting management to go outside the food and beverage industries to explore other growth avenues such as within the franchise, aged care and pubs and clubs sectors.
While management has not given profit guidance, it said the strong growth momentum from GoGetta is expected to continue throughout 2016 and that its core business will enjoy ongoing funding opportunities from the 4.3% growth rate over the past five years for the Australian restaurant industry.
Further, its Canadian operations should become profitable in the current financial year after breaking even this year.
Consensus is currently tipping a slowdown in Silver Chef's growth rate to 12.6% for 2015-16. I don't think this will change materially, which implies that the stock is trading on a price-earnings multiple of just under 14x and a yield of around 7% (including franking) for the current year.
That's reasonably attractive but I don't think there is material upside for the stock. Given the deep plunge in share prices across the market, I see better opportunities elsewhere and this is why I sold my position in the company a number of weeks ago.
