Spar, Mr Price, Medi-Clinic

Finweek English Edition - - Cover -

VAN ZYL AC­KNOWL­EDGES the at­trac­tive­ness of Shoprite. How­ever, he prefers Spar – sim­ply be­cause of its val­u­a­tion rel­a­tive to Whitey Bas­son’s more fully priced op­er­a­tion. Spar is on a mul­ti­ple of 13,5 times ver­sus 16 for Shoprite. BoE fore­casts solid growth of 16,5% HEPS for Spar in 2009 and a div­i­dend of 315,8c. That would place the stock on a for­ward mul­ti­ple of 11 and a div­i­dend yield of 6%.

Cloth­ing re­tailer Mr Price has only a frac­tion of its cus­tomers us­ing credit: sales to the 2008 half-year grew a buoy­ant 18,6% and bad debts on its tightly man­aged debtors book fell. Nearly two-thirds of ap­pli­cants are de­nied credit. The group trades on a for­ward mul­ti­ple of nine times, based on earn­ings growth of 20% and a for­ward div­i­dend yield of 5,7%.

Health­care is also widely re­garded as de­fen­sive. How­ever, nu­mer­ous reg­u­la­tory chal­lenges in the SA en­vi­ron­ment and pres­sure on mar­gins make Medi-Clinic a sur­pris­ing choice. Van Zyl likes the group’s rand hedge com­po­nent through its own­er­ship of Swiss hospi­tal group Hirs­lan­den. He ar­gues that de­spite ini­tial con­cerns about the lev­els of debt taken on to fund the Swiss ac­qui­si­tion, Medi-Clinic hasn’t ex­pe­ri­enced dif­fi­culty fund­ing it.

Its SA op­er­a­tions showed 12% growth in its most re­cent re­port­ing pe­riod and main­tained its mar­gins. It trades on a for­ward earn­ings mul­ti­ple of 13,3 times and a div­i­dend yield of 4%. “That’s not bad for a low-risk busi­ness,” says Van Zyl.

In­vest­ments head, BoE Pri­vate Clients Jo­hann van Zyl

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