Report
Victor Dima

Massmart Holdings (Hold, TP ZAR 137.70/share) FY 16A result first take: 20bps expansion in EBIT margin, driven by Massdiscounters and Masscash segments and growth in other income


  • MSM revenue grew by 7.7% y/y to ZAR 91.2bn in FY 16A (ACe: 7.7% y/y, Consensus: 8.0% y/y) and by 6.8% y/y in H2 16A (ACe: 6.8% y/y, consensus: 7.4%). Driven by strong revenue growth in Masswarehouse (28.8% of sales) of 11.0% y/y.
  • Group GP grew in line with ACe by 7.8% y/y to ZAR 17.3bn (Consensus: 8.8% y/y), with a GP margin of 19.0% (ACe: 19.0%), +10bps higher y/y.
  • EBIT grew by 15.5% y/y to ZAR 2.4bn (ACe and Consensus: 11.5% y/y), with EBIT margin expanding by 20bps y/y. This was aided by other income growth of 72.6% y/y to ZAR 217m (0.24% of sales vs. FY 15A: ZAR 126m; 0.15% of sales)
  • EPS grew in line with ACe and Consensus: 17.8% y/y, helped by the insurance proceeds of ZAR 98m from the Jumbo store that burnt down a year ago. HEPS increased by 15.8% y/y to ZAR 5.98/share, ahead of ACe: 5.66/share and below consensus of ZAR 6.12/share.
  • DPS decreased by 12.9% y/y to ZAR 2.25/share missing ACe: ZAR 2.83/share and DPS: ZAR 2.98/share, implying a payout ratio 37.6%, 5.8ppts increase y/y.


Underlying
Massmart Holdings

Provider
Arqaam Capital
Arqaam Capital

Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa. 

Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research. 

Analysts
Victor Dima

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