Alex Duys, portfolio manager at Umthombo Wealth on what the smart money is doing
16 June 2022 - 05:00
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
The latest results were quite good, and we believe Mr Price is well positioned for the future. Power Fashion and Yuppiechef have annualised revenue of R2.5bn, and management has stated an ambitious target of R7.5bn by 2027. This target is materially ahead of what we and the market were expecting, so if it can execute on that, it can deliver a solid pipeline of growth. Mr Price boasts a strong net cash position, so it can easily fund the potential Studio 88 transaction. We thus believe the recent share price weakness offers a compelling opportunity to buy Mr Price with a medium- to long-term outlook.
SELL: Vodacom
I’ve been quite bearish on Vodacom for some time. Vodacom’s growth prospects are muted at best, so management decided to embark on an aggressive capital allocation strategy. We are cautious on the return profile of these capital allocation decisions, especially the Vodafone Egypt transaction. We believe it is likely that group returns will continue to dwindle, which will affect Vodacom’s historical premium rating. We would have preferred Vodacom to focus on share buybacks and organic growth rather than embarking on transformational deals.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
BROKERS’ NOTES: Buy Mr Price, sell Vodacom
Alex Duys, portfolio manager at Umthombo Wealth on what the smart money is doing
Alex Duys, portfolio manager: Umthombo Wealth
BUY: Mr Price
The latest results were quite good, and we believe Mr Price is well positioned for the future. Power Fashion and Yuppiechef have annualised revenue of R2.5bn, and management has stated an ambitious target of R7.5bn by 2027. This target is materially ahead of what we and the market were expecting, so if it can execute on that, it can deliver a solid pipeline of growth. Mr Price boasts a strong net cash position, so it can easily fund the potential Studio 88 transaction. We thus believe the recent share price weakness offers a compelling opportunity to buy Mr Price with a medium- to long-term outlook.
SELL: Vodacom
I’ve been quite bearish on Vodacom for some time. Vodacom’s growth prospects are muted at best, so management decided to embark on an aggressive capital allocation strategy. We are cautious on the return profile of these capital allocation decisions, especially the Vodafone Egypt transaction. We believe it is likely that group returns will continue to dwindle, which will affect Vodacom’s historical premium rating. We would have preferred Vodacom to focus on share buybacks and organic growth rather than embarking on transformational deals.
BROKERS’ NOTES: Buy Alibaba, sell Snapchat
BROKERS’ NOTES: Buy Reunert, sell Tiger Brands
BROKERS’ NOTES: Buy Absa, sell Coca-Cola
Companies in this Story
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Mr Price books record profit and reports market share gains
Mr Price flags double-digit profit growth despite July’s civil unrest
Vodacom rings plans from the rooftops
Plenty of headroom to fund Vodacom expansion, CFO says
WATCH: Vodacom CEO Shameel Joosub discusses dividend hike and performance
Vodacom CEO urges restraint in mobile money levies
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.