IS SHOPRITE STILL PRICED RIGHT?
THIS week’s interim results from Shoprite only confirm what a loss the share will be to JSE investors. For the six months to December, sales are 14,9% up on a year before, and with cost of sales up only 13,8%, this small differential produces a healthy 20,0% gain in gross profit.
Six-month EPS are held back by a higher tax charge but boosted by a big positive reversal in the forex adjustment, so are up a handy 32% to 90c, making 158c for the past 12 months. Dividends for the same period are 81c.
This rate of earnings growth pretty much equates to the premium shareholders were offered to the then share price all those months ago. So how attractive is the transaction now, bearing in mind also the overall market appreciation in the interim?
I understand the JSE is close to giving approval to the instrument to be devised to give existing shareholders a potential exposure to the postbuyout Shoprite. It looks increasingly as if this option should be taken up – as long as the instrument is properly geared to underlying post-buyout performance, and not after the private equity partners have licked off the cream.