the past few years it is now
commanding a demanding forward
price:earnings ratio of 28. At this
level we feel there isn’t much upside
left in the stock. We therefore
maintain a hold recommendation.
Bull Factors
•
•
•
Budget-conscious offerings
targeting customers mainly
in the mid- to upperincome segments
Less exposed to bad debts
due to cash model and
management's cautious
approach to credit
High cash-generating business
model enables group to
fund growth initiatives
without gearing
Bear factors
•
•
•
Slowdown in
consumer spending
Increasing competition,
including presence of
international retailers
Disclosures: The analyst has
no financial exposure to the
instrument discussed. The opinion
represents his true view. ■
With most of its products being
imported, its is exposed to
currency volatility
Nature of business: Background:
Mr Price is a fashion, sport and
household goods retailer selling
predominantly for cash. It operates
through Mr Price, Mr Price Sport,
Mr Price Home, Miladys, Sheet
Street and Mr Price Money, with
a footprint in SA and 13 other
African countries.
Quantum fluffs its feathers
Quantum’s unbundling from
Pioneer Foods seem to have
breathed life into the poultry
producer as it bounces back to
profitability on its debut halfyear results. Though much of
the improvement in profitability
came from the easing up of
market conditions.
In our review six months ago we
issued a sell recommendation on
Quantum shares. Since then its
management has put measures to
change the product mix by revising
its broiler business. This included
the sale of Hartebeespoort abattoir
and remodelling of the of the
Western Cape broiler operations
which curbed the contribution
of broiler operations to just a
third of revenue from 35% in the
comparable period. This coupled
with lower raw material input costs
has seen the group exceeding
market expectations.
In the light of these developments
and other supply chain and cost
savings initiatives in the pipeline, we
revise our recommendation from
sell to hold. We think the group is in
a much better position but its
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ISSUE 4 – JULY 2015