Results for the six months to end of September were released yesterday for Mr Price

Senor Price. Preeh-say, say it like it is some sort of fashion house of sorts. Hey, the company prides themselves on good value for your hard earned money and has grown like no tomorrow. Results for the six months to end of September were released yesterday for Mr Price. I think that there must have been a leak in the results somewhere because the stock was actually suspended for a little while. In fact from just before 1pm all the way through to about a quarter to four. Byron tells me that it could have been a couple of days early.



Check out the first few lines, giving you an idea of the group sales: "The group increased retail sales for the six months ended 30 September 2010 by 11.0% to R4.8 billion, compared to the total retail sector, which grew by 7.0% for the five months ended 31 August 2010, as reported by Statistics South Africa." So clearly what they are trying to say is that they are better than the average, which is clear.





"Sales in like-for-like locations were up by 7.5% and weighted average trading space increased by 2.4%. The group sold more than 80 million units during the period, a growth of 9.7% and merchandise inflation of 1.4% was recorded." 160 million units in a year, if you annualise the half year unit sales. It is then pretty easy to work out the average price of a Mr. Price "unit". 4.8 billion divided by 80 million equals 60 ZAR. Is that right? I guess some things cost a whole lot, but that seems pretty reasonable, right? Pretty impressive that inflation is that low, good news for later in the week. You know, MPC meeting, with the announcement on Thursday afternoon.



Look at that, dividend cover has been lowered to two times, meaning that half of earnings will be paid out. Nice. As the Chairman noted in the results release: "We remain overwhelmingly a cash business with more than 82% of our sales for cash. This model has served us well throughout economic cycles" Hey, most pleasing, operating margins are about 25 percent better than the first half last year.



The outlook is a little muted, which is interesting because on the one hand the group points out the positives: "Consumers will benefit from interest rates which are at a 30 year low, a strong Rand, low inflation rate and in certain sectors, salary and wage increases in excess of CPI" See that, a strong Rand is actually good for the consumer. But, a high(er) unemployment rate and electricity price increases will weigh on the consumer. All those things considered, do not expect the same earnings growth as the first half.



First half, earnings grew from 100 cents per share in 2009 to 151 cents per share now. And for the full year last year they made 274 cents per share. So 174 cents in the second half. Forward predictions are 340 cents for the full year. The stock closed at 6360. So the stock trades on 18.8 times earnings forward (based on the assumption that they will grow earnings by 20 percent in the second half). And a dividend yield of around 3.1 percent. I think I might be a little too aggressive. Or not. Although.....turnover has doubled in 5 years. And the cycle has turned, perhaps harder than we think. We will see. The broader market participants sent the stock from 14 ZAR roughly 20 months ago to current levels. Methinks that the market participants have got this right and the price is about right.