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How this conglomerate has quietly doubled its share price in a year

Over the last year, stocks such as Kogan.com Ltd (ASX: KGN)a2 Milk Company Ltd (Australia) (ASX: A2M), Afterpay Touch Group Ltd (ASX: APT) and WiseTech Global Ltd (ASX: WTC) have all gone up over 170%.

These companies have performed very well as investors get more excited over the technologies supporting them and the growth in their businesses.

One stock that has been a surprise top performer, is Seven Group Holdings Ltd (ASX: SVW), the conglomerate which owns investments in industrial services and media. In industrial services, it owns WesTrac Group which is the sole authorised Caterpillar dealer in Western Australia, New South Wales and the Australian Capital Territory in Australia. Seven Group Holdings also owns AllightSykes, a supplier of lighting towers, generators and pumps, and Coates Hire.

In media, Seven Group Holdings has a significant shareholding in Seven West Media, Australia’s largest multi-platform media company. These investments in leading companies expose Seven Group to booms in key Australian industries such as mining and construction.

Here are a few reasons why I think the Seven Group Holdings share price has done well:

  • Acquisition of Coates Hire. Seven Group Holdings is now the 100% owner of Coates Hire, Australia’s largest equipment hire business. The acquisition was completed at an implied 6.5 times Enterprise Value to FY 2017 EBITDA and is accretive to the Group’s earnings per share and free cash flow.
  • The sale of WesTrac China for $540m strengthens the company’s balance sheet, frees up capital for new transactions and management concluded that it optimizes the value of the business at the right time in the cycle.
  • The company experienced strong earnings growth which was at the upper end of management’s guidance.

Going forward, I think there is still some long term upside to Seven Group Holdings. The company’s investment in Beach Energy Ltd (ASX: BPT) also gives them exposure to oil which has been rising towards the US$70 mark.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, and WiseTech Global. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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