IS SHO­PRITE STILL PRICED RIGHT?

Finweek English Edition - - Companies & markets -

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.

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