The bear and bull case for investing in Shoprite (#510)

JSE Direct with Simon Brown

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The bear and bull case for investing in Shoprite

Shoprite* (JSE code: SHP) results saw the stock down 7.5%. Let's dig into what the market maybe didn't like.

• Only 10% earnings growth?
  • With one week less and the 2021 riots in the numbers, decent albeit not knock the lights out.
• Only 600c dividend for the full year?
  • Very much in line with the average.
• Expensive on PE of over 20x?
  • Always is, but mid-range is about 15% lower. So yes, maybe a little more than usual?
• Opening 275 new stores?
  • Cost and are they cannibalising their other stores?
• RSA operating margin 6.8%?
  • The top end of the long-term range, worries that it may move lower?

But Shoprite remains one of the best food retailers globally and a core holding in my portfolio. I have bids in the market at around R170 which would put it on a PE closer to the mid-range from the last decade.

Sixty60 grew 150% and remains the absolute market leader in the grocery delivery space.

Checkers Xtra Savings has 24.7m members and it turning into a bank account.

* I hold ungeared positions.

• Sold my Murray & Roberts (JSE code: MUR)

Murray & Roberts weekly chart Not a lekker chart, I've held for a while, but am now out #JSE pic.twitter.com/BKKP4HOLhr

— Simon Brown (@SimonPB) September 4, 2022