Profit Bells Ring for Bell Equipment

Bell Equipment Limited (JSE: BEL) has been on a remarkable journey, demonstrating unwavering strength in recent months. The latest interim report illuminated their steadfast performance, with both the top and bottom lines showing remarkable resilience. From R4.23 billion to R6.00 billion, the revenue surged over the six months ending on June 30, 2023, resulting in an increase in profit attributed to shareholders, rising from R200.1 million to an impressive R327.8 million. This translated to a noteworthy surge in earnings per share, climbing from R1.80 to a remarkable R2.57 in the prior period. 

The driving force behind this success story is the strong demand that has been sweeping across most markets, particularly shining a light on the North American segment. However, it’s not been all smooth sailing. Bell has faced challenging operating conditions due to persistent supply chain issues, limiting its full advantage of a thriving market. These supply chain challenges, while persisting, have posed obstacles to their margins and overall profitability. Despite these constraints, the continuous surge in commodity demand and increased infrastructure spending in various markets provided valuable momentum to their top-line expansion. 

However, the real star of the show has been their share price performance, which has soared over the past year. An astonishing 35% appreciation has outshone the JSE Top 40 index, which rose by a modest 7% over the same period. This spectacular rise in value, however, has not been without its fair share of volatility, as seen in the chart below. The industrial and machinery industry remains susceptible to fluctuations in the business cycle. Bell’s management is fully aware of the situation and has provided a cautious outlook. Despite a robust order book on a global scale, there’s a heightened sensitivity to the potential softening of markets, particularly in Europe, due to the ongoing conflict in Ukraine, diverting resources towards military assets and potentially reducing industrial demand. Yet, Bell isn’t sitting idle. They’ve embarked on a strategic increase in production volumes to meet the surging customer demand, resulting in a significant boost to their inventory levels during the latest interim period. So, with risks clearly on the horizon, the question lingers: Can Bell continue to outperform, riding the wave of their resilient order book, as the demand for infrastructure assets remains the bedrock of their operations? 


On the 1W chart, an ascending channel has formed, with the bullish momentum confirmed by the crossing of the 25-SMA (green line) above the 50-SMA (blue line). However, the 14-day RSI is edging toward overbought conditions, and with volumes declining, the uptrend could run out of steam at the dynamic resistance of the channel.  

If the dynamic channel resistance halts the upside, a pullback is possible toward R18.02 and R16.99, where the channel support is present. While a breakdown is possible at this level, the support at R16.05 is backed by the 50-SMA, which could challenge the downturn’s sustainability. Despite this, neckline support exists at R14.66 if the price moves below the 50-SMA in an immediate shift in sentiment. 

However, should the price remain trading above the R16.99 support level, a continuation of the ascending channel could lead the price to resistance at R20.14 and R20.98. At these resistance levels, the estimated fair value of R22.12 is within reach, presenting a 13.02% potential upside from current levels.  


The company’s revenue increased from R4.23Bn to R6.00Bn in the latest interim report, with the largest attribution coming from manufacturing, assembly logistics, and dealer sales operations in Europe, which increased from R1.46Bn to R2.42Bn. Its South African operations in this segment also improved, rising from R822.83M to R1.12 Bn. Direct Sales operations from South Africa rose from R1.72Bn to R2.08Bn, while the rest of Africa attributed R387M to its top line, rounding off a solid six months across the board. This revenue increase marks a steep incline from the previous periods, as shown in the graph below. While not boasting magnificent growth rates historically, Bell has grown its revenue and gross profit at a slow and steady rate. Now, the question lingers: Is the company situated to continue advancing these metrics in the future? 

When looking at the balance sheet, investors can feel assured of the company’s ability to cover its obligations. Over the last five years, Bell’s long-term debt position has drastically declined, while its cash base has shown the opposite trend. With cash and short-term investments now exceeding the debt position, Bell seems well situated to invest in potential growth prospects without feeling concerned about obligations coming due, which could take away from their spending ability on expansion. Based on the decision that management made in the latest interim report regarding its dividend, it looks like that is the plan. The company did not declare a dividend, with a view to allocate cash to targeted growth and inventory investment as they look to capitalize on the improving conditions in the market.  

While revenue and profit showed strong performance in the latest interim results, there was still a shadow of uncertainty cast over the company’s future as group CEO Leon Goosen announced his intention to leave the organization at the end of December. As the company looks for a suitable successor, an uncertain period lies ahead for Bell, with new management taking over at the beginning of next year.  


Bell Equipment Limited has displayed robust performance over the last year, backed by steady growth in its top and bottom line in its latest interim results. With new management taking over next year, an uncertain yet exciting future lies ahead for the company, and if they continue on their current path to success, the estimated fair value of R22.12 could be well within reach as we advance.  

Sources: Koyfin, Tradingview, News24, Yahoo Finance, Bell Equipment Limited 

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