Clicks (CLS) - Why SA Pharmacies are Prized
Summary
We evaluate CLS in the context of its EM pharmacy retail peers, and note the company is ideally positioned by operating in a market with moderate consolidation (which present above avergae growth opportunities), with many of its peers in this segment being unlisted. In the group of six EM countries in the moderate consolidation segment, we find only seven listed pharmacy chains, of which two (CLS and DCP) are in SA.
While CLS’ rating may seem high in the SA market, in the context of other pharmacy chains in its peer group, its valuation does not appear excessive. However, factoring in the underlying market strength (GDP growth), the valuation metrics of some of these EM pharmacy chains (including CLS) do pose some risk of correction, in our view.
Clicks is an investment holding company. Through its subsidiary, Co. is engaged in providing health and beauty merchandise through a network of 657 stores, including 34 in the neighbouring countries of Namibia, Botswana, Swaziland and Lesotho. Co.'s subsidiaries cover the pharmaceutical supply chain from wholesale and distribution to retail pharmacy, as well as beauty and cosmetic products. Co. operates primarily in southern Africa. Co.'s operating segments comprised of Retail and Distribution. Co.'s brands are Clicks, Musica, The Body Shop, GNC and Claire's.
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