Will Mr Price follow Capitec’s up trend?

Capitec share options are the remuneration reward that just keep giving. That must certainly be the feeling co-founder and former CEO Riaan Stassen gets every time he sells a chunk of the share options he was awarded during his tenure. Because the share price has performed so strongly over the past several years, each time Stassen sells a block, the diminished number he is left with becomes ever more valuable.

In September 2013, when Stassen announced his retirement, he owned 2-million Capitec shares. At the time, they were worth R408m. This week, with the share almost touching R1,100, his retirement stash would have been worth a staggering R2.2bn.

However, Stassen has been steadily selling shares since his retirement, presumably to help fund his exciting wine venture in Happy Valley outside Stellenbosch. In mid-December, he sold 50,000 for R49m. Less than two weeks later, on December 29, he topped up his cash holdings with the sale of a hefty 100,000 Capitec shares. This transaction generated R107m. Despite all this selling activity, Stassen is left with 902,500 Capitec shares, which are worth just under R1bn. That’s more than twice as much as his much larger Capitec holding was worth back in 2013.

Given the substantial role Stassen played in creating and building Capitec from nothing into one of the country’s big five banks, few would quibble about his massively generous reward. The company was listed on the JSE in 2002 at R30.

A strong push into transactional banking and sustained inroads into the largely low end of the lending market helped to drive the bank’s early growth and its sparkling share price performance.

More recently, it has been making strong inroads into wealthier market segments and is giving the big four banks a run for their money as traditional bank clients balk at everincreasing fees.

The jury is still out on how retailers performed this past festive season. But Mr Price, the 2017 star retail performer, is one to keep an eye on. While 2017 was a difficult year for clothing retailers, Mr Price rose like a phoenix from the ashes. After an abysmal 2016 financial year, the retailer gave a strong showing in financial 2017, largely thanks to a better operating performance in its apparel business. The group reported headline earnings per share jumped 22.2% to R4.43 and profit after tax increased 23.7% to R1.1bn. Cash and credit sales also grew 7.2% and 5.1%, respectively. An astounding performance considering the group was battling both a weak economy and foreign competitors.

Market watchers are hopeful Mr Price will deliver another stellar performance in 2018. Although analysts are sceptical about a retail recovery, Mr Price might just be the exception.

The Treasury is anticipating economic growth of 1.1% for 2018, which is pitiful compared with other emerging markets. Affordability is the name of the game for consumers. Mr Price’s moderately priced and fashionable lines give it an edge over rivals such as TFG and Truworths. The entry of foreign fashion retailers like H&M, Cotton On and Zara has forced local retailers to reinvent themselves, which Mr Price has met with its “new generation” stores. The retailer is expected to update the market with a trading statement next week. This should give a clearer picture of how the comeback kid is faring.