Massmart (MSM) – Share Price Defying Gravity

Our analysis shows topline growth that is volatile with no clear indications that a recovery is in the offing. The poor start to FY17 is worrisome, and while management is optimistic in their outlook for FY17, we don’t think this optimism is strongly supported by evidence on the ground. The food retail strategy, especially as it pertains to Game Foodco, may grow incremental sales, but we think the profitability of this category is unlikely to match that of the large food retailers in view of its dispersed store base.