reports
- Ian Brink
Blue Label Telecoms (BLU) – Building an ecosystem
Summary We initiate coverage on Blue Label Telecoms with a BUY recommendation The SA Distribution segment remains the core of the business. We believe that regulatory developments in India and a resurgence in cash usage have negatively impacted on the growth potential of the Oxigen business. Despite the significant potential of Mexico’s airtime market, stubbornly high market concentration threatens to persist and smother growth. The Mexican business is subscale, in our view. On its own, the g...
- Anton Solomons
Novus Holdings - Overvalued
We view Novus Holdings as overvalued at current levels. The print industry appears to be in a consolidation phase and for Novus, the impact on volumes, prices and operations has already contributed to margin pressure and some mothballing. We expect these trends to continue over the forecast period. We see the use of the internet to consume media as a threat to print media consumption.
- Jasmine Lin
Steinhoff (SNH) ; Price Discovery - How we value Steinhoff
Summary In the wake of the developments at Steinhoff (SNH), shareholders have found it difficult to assess the fair value of SNH. The FY17 financials are still outstanding, and prior year financials are also under review. Without reliable financial information and increasing risk of litigation, investors have found it challenging to assign a value to the share with some degree of comfort. The consequence of this breakdown in the market price discovery mechanism is share price movements that are...
- Jasmine Lin
Steinhoff (SNH) ; Price Discovery - How we value Steinhoff
Summary In the wake of the developments at Steinhoff (SNH), shareholders have found it difficult to assess the fair value of SNH. The FY17 financials are still outstanding, and prior year financials are also under review. Without reliable financial information and increasing risk of litigation, investors have found it challenging to assign a value to the share with some degree of comfort. The consequence of this breakdown in the market price discovery mechanism is share price movements that are...
- Ian Brink
Telkom (TKG) - Disrupt and Conquer
Telkom produced a poor set of results in 1H18 with HEPS declining by 7.4% y-y to ZAR3.04. This however beat our and market expectations by 12.6% and 11.4%, respectively. Poor top-line growth of -0.6% y-y resulted from the impact of weaker business sentiment on private and public sector spend. We are concerned that some of the longer-term economics of the business are not stacking up – high reliance on voice and declining fixed access lines, less than parity substitution of ADSL with fibre and ...
- Tumi Makoah
Ascendis Health (ASC ) - Under Pressure
Summary Ascendis second rights issue in as many years is meant to manage the c. ZAR2bn worth of deferred vendor liabilities as a result of acquisitions. The subscription price of ZAR20 is at a premium to the 30-day VWAP and lower than the ZAR22 price of the first rights issue. We also show that ASC share price has always traded at a premium to NAV and that on 30 June 2017, it was trading at c.76% premium to NAV. On a divisional basis, organic sales growth for the Consumer Brands division has ...
- Shamil Ismail
Mr Price (MRP) - All is not well at Home
Summary MRP delivered strong results for 1H18 with HEPS growth of 23.6% y-y and a recovery in Apparel sales growth. However, the results did benefit from a soft 1H17 base, and our analysis of longer term volume trends show that units sold in this period were slightly less than that of 1H15, even though space increased by 17% since then. More concerning for us are the trends in the homeware chains, as MRP Home’s units sold have been declining since FY13. This suggests to us that there may some s...
- Ian Brink
Vodacom (VOD) - Mo Money No Problem
Summary Vodacom delivered a decent set of 1H18 results despite missing our and consensus HEPS estimates by 9.7% and 8.4%, respectively. Data has overtaken voice as the biggest contributor to SA service revenue. Through data promotions designed to illicit more appetite for data services in SA, effective prices were driven down more than anticipated – we expect this to normalize in 2H18. We detect more urgency from management around finding alternative growth streams. One potential growth vecto...
- Jasmine Lin
Lewis (LEW) - Landing UFO
Summary We are encouraged by LEW’s proposed acquisition of high-end furniture retailer UFO, which we believe could provide a sustainable revenue stream independent of credit sales. The key risk with this acquisition is LEW’s lack of experience and limited success in merchandising for the higher-end market. We are reminded of its previous Lifestyle Living brand which had little success. However, given the current constraints to credit sales growth, we think that ensuring UFO’s success will be t...
- Shamil Ismail
Spar (SPP) - The Weakest Link
Summary SPP’s FY17 results were disappointing and we are concerned about the impact which a protracted low topline growth environment may have on its individual franchisees. Through a series of scenarios, we assess which levels of turnover growth would swing the profitability of a franchise store into an operating loss. We find that franchisees that are geared may be vulnerable to the current low levels of turnover growth, and considering the periodic refurbishment of stores, we think that a su...
- Jasmine Lin
Famous Brands (FBR) - In a Pickle
Summary There are some structural changes to the cost base of FBR’s UK business which we think will result in a protracted weakening in performance from GBK. We look at labour costs and business rates and show that they have increased significantly relative to last year. We think a restructure of its debt profile should be a priority as its first bullet repayment is due in less than two years’ time. We show that even with no dividend payout in FY18, FBR may still fall short of funds required ...
- Shamil Ismail
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 ot...
- Thambo Mthwalo
Consumer watch - October 2017
Summary Recent economic indicators point to a largely positive period of consumption in the months leading to October. Encouraging retail sales growth was reported for August at 5.5% y/y, while food and beverages sales growth outpaced CPI in the same month. In September, the SA Consumer and Producer Price Index increased by 30bps and 100bps to 5.1% and 5.2% respectively. Business confidence recovered somewhat from the August decline, coming in at 93.0 points. Manufacturing remains weak; the AB...
- Shamil Ismail
Pick n Pay (PIK) - Mind the Gaps
Summary Our analysis shows that growth in the Pick n Pay owned SA supermarket chain may have stalled in 1H18. Through a series of store visits, we attempt to uncover the key issues hampering a definitive turnaround of PIK. Our research shows that store discipline in some areas may have lapsed, which could have resulted in lost sales. A review of some customers comments on their Pick n Pay store experience were consistent with our findings. We believe that in the context of PIK’s cost cuts in ...
- Tumi Makoah
APN - Bull In a China Shop
We believe Aspen Pharmacare (APN) will continue to face pricing pressure both in Europe and increasingly in China. China is the next frontier along Aspen’s expansion trajectory. Aspen has recently established operations in China through the acquisition of the anaesthetic and thrombosis portfolios from AstraZeneca and GSK. Although the Chinese pharmaceutical market is the second largest globally, we believe poor sales performance by multinationals in China is an indicator of tough operating cond...
- Jasmine Lin
TAS - Testing Times for Taste
We think TAS had dropped the ball on its profitable jewellery division during the sale period and resulted in the division becoming loss-making. We believe that the ability to sell its jewellery division is limited because of its broad product offering, which partly contributed to the lack of interest from potential buyers. TAS had been focused on developing the Domino’s and Starbucks brand at the expense of its local food brands which had previously performed well. In our view, it may be time...
- Anton Solomons
Workforce Holdings (WKF) - Overvalued
An initiation report on Workforce Holdings, an employment services group. Workforce commands only a c.3% share of the local temporary employment market and has begun to make progress with a regional expansion drive. Locally, the employment services industry remains highly fragmented which limits pricing power for larger participants. The largest participant locally has c.15% market share. The group's strategy to diversify its earnings away from its employment service division has contributed t...
- Jasmine Lin
Grand Parade Investments (GPL) - All eyes on Burger King
Given Burger King’s importance to the group, we break down its performance to fully understand the potential growth of this brand. We highlight where we think there is opportunity to improve Burger King's margins. We also high the risk the Dunkin' Donuts could face with its store roll-out requirements.
- Thambo Mthwalo
Consumer watch - September 2017
September was relatively positive for the South African consumer. The SA Consumer and Producer Price Index came off YTD lows in July increasing 20bps and 60bps to 4.8% and 4.2% respectively. In August, the ABSA Purchasing Managers’ Index improved by 1.1 points following a 3.8-point decline in July. Business confidence sank to its lowest level since the mid-1980s at 89.6 points. The rand lost significant ground, closing the month at ZAR13.54/USD on the back of hawkish comments by the US Federal R...
Unfortunately, this report is not available for the investor type or country you selected.
Report is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.