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Cape Town - Imara SP Reid analyst Warwick Lucas - who has been consistently bearish on Pick n Pay Stores [JSE:PIK] for the last two years - is now punting the Ackerman family-controlled supermarket group as the "favoured food retailer" on the JSE.
In a note to clients on Tuesday evening, Lucas said the sale of struggling Australian subsidiary Franklins for R1.4bn was long overdue.
He highlighted comments by Pick n Pay chairperson Gareth Ackerman around the proceeds from the Franklins sales being used for various strategic business initiatives in southern Africa.
Lucas discounted the long-held market view that Pick n Pay would have lost a lot of first mover advantage in terms of expansion into other African countries.
"This is rot! Anyone following the roll-out of fast food brands in Africa will know that second movers have a simple and effective catch-up strategy - 'follow the leader'. It really is that simple."
'Formidable competitors'
He argued the "leader" spends a fortune in time working out the best sites, but also building acceptance for branded retail.
"Additionally, just because Pick n Pay lost the plot strategically doesn't mean they lost sight of their product. Far from it! They are formidable competitors, and as of right now, we believe they should be re-rated back to the same buy-hold-sell price relatives as Spar and Shoprite."
Lucas said Pick n Pay had become Imara SP Reid's favoured food retailer for the first time since 2003, rating the share a long-term "buy".
Lucas told Fin24: "Over the last few years we have consistently regarded this stock as over-rated. The best we ever gave Pick n Pay was a 'hold' recommendation."
- Fin24.com
In a note to clients on Tuesday evening, Lucas said the sale of struggling Australian subsidiary Franklins for R1.4bn was long overdue.
He highlighted comments by Pick n Pay chairperson Gareth Ackerman around the proceeds from the Franklins sales being used for various strategic business initiatives in southern Africa.
Lucas discounted the long-held market view that Pick n Pay would have lost a lot of first mover advantage in terms of expansion into other African countries.
"This is rot! Anyone following the roll-out of fast food brands in Africa will know that second movers have a simple and effective catch-up strategy - 'follow the leader'. It really is that simple."
'Formidable competitors'
He argued the "leader" spends a fortune in time working out the best sites, but also building acceptance for branded retail.
"Additionally, just because Pick n Pay lost the plot strategically doesn't mean they lost sight of their product. Far from it! They are formidable competitors, and as of right now, we believe they should be re-rated back to the same buy-hold-sell price relatives as Spar and Shoprite."
Lucas said Pick n Pay had become Imara SP Reid's favoured food retailer for the first time since 2003, rating the share a long-term "buy".
Lucas told Fin24: "Over the last few years we have consistently regarded this stock as over-rated. The best we ever gave Pick n Pay was a 'hold' recommendation."
- Fin24.com
