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WorldWide Markets with Simon Brown

SA Retail Stocks: Where the Value Is Right Now

·22 min·2 clips
Why does the market price Pick n Pay as if it will go bankrupt, and could there be hidden value?
The episode begins with Simon Brown introducing the topic of South African retail stocks, questioning if value exists in this sector. He provides a disclaimer that he holds positions in Shoprite, Mr Price, The Foschini Group, and Lewis. Brown starts with food retailers, analyzing Shoprite first, noting its forward P/E of 17.3 compared to a 10-year average of 21, and views it as decent value. He discusses Boxer, noting its forward P/E of 20.7 and analyst holds. Pick n Pay is highlighted as trading below the value of its stake in Boxer and cash, with the market pricing it as if bankruptcy is certain, which Brown questions. Spar is described as trading at 2011 levels with no dividend. The host then moves to clothing retailers, starting with Pepkor, which is under pressure despite strong businesses like Flash and ambitions in banking. The Foschini Group is noted as cheap with a P/E of 8 and a dividend yield over 5%. Mr Price is analyzed, with its forward P/E of 10 and market pessimism over its Eastern European expansion. Lewis is discussed for its high dividend yield of 9.85% and low P/E, though risks from bad debt are noted. Woolworths is mentioned briefly as a turnaround story. Throughout, Brown references analyst reports from Standard Bank Securities and considers the impact of the Iran conflict on inflation and consumer spending. The episode concludes with a mention of CMH and upcoming events.

As heard by us

A brisk look at South African retail names where valuation and distress keep pulling in opposite directions.

Simon Brown weighs South African consumer stocks with a clear eye on what remains in a battered sector. He moves through Pick n Pay's sub-20 share price, Spar's slide back to 2011 levels, and the Boxer stake with enough valuation detail to keep the discussion grounded rather…

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Why you'd press play

You get a value check on beaten-down South African consumer stocks, with Pick n Pay and Spar doing most of the heavy lifting.

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