Massmart trading update, moving along nicely

Massmart released a trading statement for the six months to end 25 December 2011, with the actual results expected in three weeks time. Basic EPS is expected to increase by 10 to 18 percent (quite a wide range) to around 401.8 to 431.1 ZA cents per share. Half year earnings are expected to have increased by 17 to 25 percent in a range between 864 to 923.1 million ZAR, which compares very favourably to the period to 2010, where the actual earnings were 738.5 million ZAR. Obviously, as they point out, the "reason for the lower growth rates for the per share figures is due to the higher number of issued shares following the implementation of the Walmart transaction in June 2011."

Walmart. The biggest private employer in the world, let us not forget that. Associates is what each and every employee is called, and there are 2.2 million of them. Without Walmart we would not have cheap products and they have done more for society to lower inflation than any government intervention that I can think of. 400 billion Dollars plus of annual revenue tells me that consumers are right about this, regardless of what you hear organised labour say. If earnings come in at the top end of the range, folks will start to say, perhaps the high earnings multiple is deserved. Because then we would be closer to a three percent yield. In a world searching for that very thing, yield, at growth rates of around 20 percent, perhaps the South African investment community are barking up the wrong tree. Remember however that the first half of the financial year is much better for Massmart than the second half.