Experts give Spar thumbs up in spite of rivals' sh
Experts give Spar thumbs up in spite of rivals` share performance
November 9, 2004
By Samantha Enslin
Durban - Spar, the food wholesaler and distributor, has had a muted performance since listing on the JSE Securities Exchange three weeks ago, underperforming against competitors Massmart, Shoprite and Pick `n Pay.
The group, which listed on October 18, was unbundled from parent Tiger Brands.
Since closing at R20 on its first day of trade, Spar`s share price has dropped to R19.40 and yesterday closed at R21.10. The food and drug retailers index has gained 10 percent since October 18.
The reasons for Spar`s poor performance relative to its competitors are unclear. One analyst said that as a new company there were aspects about Spar that were still unknown, and investors might be waiting for detailed information.
Regardless of Spar`s performance on the JSE, analysts still regard the group favourably, and earnings per share are forecast to grow steadily.
The I-Net Bridge consensus forecast for Spar is earnings per share at R1.66 for the year to September 2004, R1.83 the following year and R2.13 in 2006.
Mark Ansley, a retail analyst at African Harvest, said yesterday that `the group is a formidable operation, which operates so efficiently`.
Pro forma results, which Spar issued as part of its prelisting statement, show revenue for the year to September at R11.9 billion and headline earnings at R279 million. Based on these results, the company`s gross margin is 8.4 percent and its operating margin is 3.4 percent.
Ansley said such a gross margin was an impressive figure as Spar was effectively a wholesaler.
For the year to June, Shoprite`s operating margin stood at 2.6 percent.
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