By Andrew Main
What better way to celebrate Australia Day than to replace the backyard barbecue?
Australia has a fine tradition of DIY barbecues using unlikely materials. Old bushies who were Land Rover fans used to use the lift-off radiator grilles as grills and were mortified when the Series III came out in the 1970s with a plastic one. At least one lonely diner allegedly failed to spot the difference until it was too late.
We’ve moved a long way from that but there’s always room for improvement.
Listed Australian company Shriro Holdings (ASX:SHM) recently launched the Everdure by Heston Blumenthal range of barbecues.
The English culinary maestro might not be your cup of liquid nitrogen but there has to be upside in reconsidering the way we cook food out of doors.
British chef, Heston Blumenthal. Source: AAP
The big positive of the Everdure range, launched in September, is that a patented electrical heating element gets charcoal up to cooking temperature in around nine minutes, while the market giant Weber of the US takes around twice as long to get that hot and other barbecues take even longer. You might not have known this but most outdoor cooking around the world relies on charcoal.
An October report on Shriro from Wilson stockbrokers noted that “anecdotal evidence suggests immediate traction on sales … in the domestic market despite cooler than normal weather on the east coast.’’
The weather has certainly warmed up since then but we’ll have to wait for the full-year results announcement in February to know how Everdure sales went.
Shriro’s a Sydney based kitchen appliance and consumer durables wholesale specialist that’s capitalised at around $120 million and has that rarest of joys, a solid fully franked dividend yield of around 8%. Its 2015 dividends were 6 cents a share and the 2016 total is forecast by Wilsons to hit 10 cents.
It sells almost exclusively in Australia and New Zealand although it has a small staff in China keeping an eye on the quality of some of its product range that is manufactured there. It has around 150 staff overall, mostly based in Sydney’s Kingsgrove.
The shares which were first listed in June of 2015 at $1 are now priced around $1.16.
Heston’s barbecues may, in future, be a big part of Shriro’s range of offerings but the company currently earns more than half its revenue from being the sole distributor of Casio products in Australia. As in calculators, watches and keyboards, none require a sunny day and cold beer to work best.
To give you an idea of how good that cash flow is, Casio calculators enjoy between 90 and 95% of the Australian school calculator market via the basic Casio FX 82 model, which retails for around $22.
Shriro has reportedly worked with each state educational board of studies to have FX 82 learning lessons built into the school curriculum.
Meanwhile, the Casio G-shock range of watches is a solid seller among younger Asian males, both here and in New Zealand.
SHM is reporting its results in mid February. Net profit after tax (NPAT) is expected to increase by around 8% from the normalised $12.4 million reported for 2015, held down mostly by the one-off expenses related to the launch of the Everdure range. Without those expenses, growth would have been in double figures.
It also makes cooktops and stoves in Italy under the Omega label, intended to bridge the gap in the market between the basic offerings and the Miele/Smeg level products.
The Omega range was designed by Rockpool group founder Neil Perry, who incidentally introduced Heston Blumenthal to Shriro.
The company’s biggest shareholder is 33% holder Shriro Pacific, controlled by Monaco resident Mark Shriro. The family started out more than a century ago in China selling furs into Europe via the Trans Siberian Railway, so don’t write the stock off for its Monaco connection.
There was a price lurch last year down to the 80 cent mark because of what appears to have been a failed 5% selldown by the controlling shareholder, but people close to the company say that any selldown that occurs in future will be better managed.
Shriro Holdings is in that interesting size range whereby it would like to make organic acquisitions, and at the same time, be a possibly tempting target for a bigger company in the same space, such as Breville.
Last year, Shriro CEO Mike Westrup, who was previously at Breville himself, said Shriro was looking for a bolt on acquisition in the $15-$25 million EBITDA range.
“The acquisition has to make sense and be in an allied area of SHM’s expertise,’’ he said.
Certainly, Shriro’s temptingly low Price Earnings ratio makes it a target for a bidder with a higher PE, as the usual measure demands.
Wilsons has it on a forecast PE for the 2017 calendar year of 8.7 times, the lowest in its sector compared with for instance GUD on 8.9 times and Breville on 10.3.
It has a Buy on the stock, no great surprise given it was a joint manager of the float, with a 12-month target price of $1.55.
In a world of maybes, uncertainties and tech stocks, this widget purveyor with a steady track record and a good yield could be worth a look.
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