Our opinion on the current state of HOMCHOICE(HIL)HomeChoice (HIL) is South Africa's largest home shopping retailer, operating through two divisions: retail and financial services. It offers a broad range of home appliances, clothing, fashion, footwear, and related products through showrooms and online channels. The share is tightly held, with over 92% of issued shares controlled by Richard Garrat and his family.
A planned share issue, which would have improved liquidity, was shelved due to challenging retail sector conditions. This has left the stock thinly traded, making it unsuitable for most private investors despite its potential as an investment if liquidity improves.
HomeChoice has been expanding into brick-and-mortar retail, with five stores already open and another twenty-five planned. These stores help attract new customers for both retail sales and micro-loans. The company has also extended its financial services offering to include micro-loans, insurance products, and funeral cover. Given the tough economic climate, it has had to increase provisions for impairments on both its retail credit and micro-loan books.
The company primarily serves women in Living Standards Measure (LSM) categories 4 to 8 and has over 870,000 active customers. It continues investing in its digital platform to enhance online shopping and financial services. Online loans are seeing strong growth, with 20,000 new customers signing up each month. Additionally, it is rolling out "bright pink" container shops in townships, allowing customers to collect online orders or apply for business loans.
In its results for the six months to 30th June 2024, HomeChoice reported revenue up 14.6% and headline earnings per share (HEPS) up 37%. The company said, *"HIL has delivered a strong financial performance, with exceptional growth from Weaver Fintech, which is contributing 95% of the group's operating profit. Our digital-first approach continues to provide scalability and efficiency to our businesses and outstanding customer convenience."*
In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 20% and 30%. While the company shows strong financial performance and growth potential, its limited trading volume makes it highly risky for private investors.
