Massmart (JSE : MSM)
Massmart: Year-to-date, MSM, along with the rest of the SA retail sector has been under siginficant pressure due to a sluggish out for the SA economy as well as a weaker Rand. Since March 2018, the price is down from a high of R178 sliding to a low of R101 in July. Over the last three months we have seen a base develop, with the price recently starting to trade back above the 8 and 21-day moving averages. The key breakout level here is R118.95 however traders should look for strong closes in the region of R116 to R117 as evidence of a potential breakout.
Massmart reported sloppy H1 ’18 results. Gross margins was on the decline mainly due to margin pressure from food deflation.
The company reported a decline in HEPS with 41.9%.
The massive decline in HEPS was due to restructuring costs, lower volumes and deflation.
But we still see upside for MSM…
Total sales grew by +1.9% and product deflation was 0.7%.
L4L sales in food declined 1.5%. However a 9.2% increase in liquor sales was reported together with 7.6% improvement in home development sales.
Furthermore, deflation of commodity prices should ease into H2 ’18. Analysts are expecting durable goods demand to improve and and this will put Massmart in optimal position to gain pricing power.
Online sales are expected to grow in the range of 60% and should theoretically improve the balance sheet of MSM and eventually push the share price higher.
MSM is planning to open an additional 18 new stores in the remainder of 2018 which should lead to higher growth due to expansion.
Here is what we plan to do:
Buy @ 119
TP @ 133 (200 dma)
SL @ 109
Massmart reported sloppy H1 ’18 results. Gross margins was on the decline mainly due to margin pressure from food deflation.
The company reported a decline in HEPS with 41.9%.
The massive decline in HEPS was due to restructuring costs, lower volumes and deflation.
But we still see upside for MSM…
Total sales grew by +1.9% and product deflation was 0.7%.
L4L sales in food declined 1.5%. However a 9.2% increase in liquor sales was reported together with 7.6% improvement in home development sales.
Furthermore, deflation of commodity prices should ease into H2 ’18. Analysts are expecting durable goods demand to improve and and this will put Massmart in optimal position to gain pricing power.
Online sales are expected to grow in the range of 60% and should theoretically improve the balance sheet of MSM and eventually push the share price higher.
MSM is planning to open an additional 18 new stores in the remainder of 2018 which should lead to higher growth due to expansion.
Here is what we plan to do:
Buy @ 119
TP @ 133 (200 dma)
SL @ 109
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