Our opinion on the current state of DIS-CHEM(DCP)Dis-Chem Pharmacies (DCP) listed in November 2016 and competes directly with Clicks (CLS) in the pharmaceutical, medicine, and beauty products markets. It is a family business run by the Saltzman family, who had a controlling stake in the business through a private company, Ivlyn. On 24th August 2021, Ivlyn announced the sale of 7.5% of its shares in a bookbuild, 3.75% to selected management (with a 10-year lock-in) and 10.5% to a BEE consortium. This leaves the Saltzman family's interest at 31.4%.
Ivan Saltzman was the CEO but has resigned and will be replaced by Rui Morais. Dis-Chem's objective on listing was to expand its store base from 108 stores, which it has now far surpassed. Theoretically, Dis-Chem can have a store in every shopping mall where Clicks has a store. Clicks had about six hundred stores when Dis-Chem was listed and has spoken of plans to expand its store base to as many as 1,200. This means that Dis-Chem has considerable "blue sky" potential—which accounts for its relatively high rating (P:E of around 21.67).
The company is buying Springbok Pharmacy and Quenets, showing that it is growing rapidly. It now has more than 254 pharmacies countrywide and is opening between 10 and 20 new stores a year. It may be possible for the company to expand into spaces left in malls as a result of COVID-19, which may be available for lower rentals. The company is benefiting from an increased awareness among customers of the need to boost their immunity and general health by buying more vitamins.
On 15th May 2020, Dis-Chem announced that it had acquired 100% of Baby City for R430m in a conditional agreement. There are significant synergies between the two companies' product and service ranges. The company is also expanding into healthcare insurance with the acquisition of 25% of Kaelo Holdings.
In its results for the six months to 31st August 2024, the company reported revenue up 9.6% and headline earnings per share (HEPS) up 16.3%. The company said, "The biggest contributor to earnings growth was the containment of Group payroll cost, predominantly driven by the successful deployment of staffing framework 1.0, which delivered positive operating leverage, with operating profit growing at 17.5%."
In an update on the five months to 31st January 2025, the company reported revenue up 7.2%. The company said, "The retail revenue recovery seen in January, largely driven by the availability of medical aid benefits, continues into February, countering weaker November trade."
In our view, this is a solid blue-chip company with a good future. Technically, the share moved sideways and downward since making a long-term "triple top" with peaks in January 2018, April 2022, and November 2024. We consider Dis-Chem to be a solid defensive share with good long-term potential, but it has shown itself to be technically volatile.
