US financial services major JP Morgan has increased its stake in SA’s largest retail group, Shoprite, to more than 7%, with its interest in the Brackenfell-based company valued at about R12.5bn, making it one of the group’s largest shareholders.
Shoprite, valued at just under R172bn on the JSE, said on Friday that JP Morgan, run by celebrated investment banker Jamie Dimon, had increased its stake in the group to 7.33%.
It comes as renewed optimism in SA Inc has emerged following May’s election, which produced a business-friendly government of national unity. It has proved to be a boon to the equities market, with the JSE all share index enjoying a purple perch.
The move by JP Morgan, the US’s largest lender by assets, also comes just a month after Shoprite reported robust results for the year ended June. The retail behemoth’s revenue increased by 12% to R246.1bn, with group trading profit up by 12.4% to R13.4bn.
The company also announced further plans to dominate the lucrative township market, where it already holds a commanding position.
The group’s CEO, Pieter Engelbrecht, told Business Day that data from the Xtra Savings platform highlights the complementary nature of the Shoprite and Usave brands, with the latter set to get about 540 new stores within five years.
Usave, launched in 2003, now has 463 stores countrywide, primarily in townships and rural towns — the heartland of the low-income consumer market.
The results show that Shoprite and Usave accounted for R99.6bn of the group’s sales in the period under review, narrowly missing the R100bn mark. The Checkers and Checkers Hyper offerings reported sales of R77.9bn.
Nedbank said in June that Shoprite’s early inroads and heavy investment in the township economy — which is said to be worth more than R700bn — put the retail giant in a good position to keep growing its market share, with its competitors a distant second.
In an investment research note, the bank said Shoprite saw an opportunity in the township economy early and put in place a clearly defined segmentation strategy across three supermarket brands — Checkers, Shoprite and Usave — catering to three distinct consumer segments.
Shoprite also disinvested from the furniture market.
“We believe that Shoprite is well positioned across all segments of the market to continue gaining market share and driving growth. The group’s expansion into higher-margin adjacent categories is expected to grow and sustain margins,” said Bianca Lakha, an analyst at Old Mutual Private Clients.
JP Morgan last month increased its stake in mining and metals processing group Sibanye-Stillwater. In a recent buying spree, JP Morgan took its stake in Sibanye to 6.17% of the group’s total issued shares, positioning it as Sibanye’s third-largest stakeholder.
Another company that JP Morgan has taken a strategic position in is Stellenbosch-based lender Capitec, which has more than 23-million active clients. JP Morgan’s stake in Capitec sits at about 8.37%, having increased to this level in May.
Led by Gerrie Fourie, Capitec has evolved and broadened its revenue streams by increasing its products and has balanced its mix of lending and transactional income by also targeting higher-income earners.
The bank has also made a foray in the competitive business banking arena. In 2019 it bought Mercantile Bank from Portuguese state-owned banking group Caixa Geral de Depósitos in a deal worth R3.5bn, shrugging off competition from Nedbank and a consortium of the Public Investment Corporation and Bayport Financial Services.
It has since rebranded Mercantile to Capitec Business and is looking at expanding its international business.
In March, the Reserve Bank approved a transaction in which Capitec will increase its shareholding in international online consumer lending group Avafin to 97.69% from 40.66% at a purchase price of €26.3m (about R523m). Avafin provides online consumer loan products in Poland, Latvia, Spain, the Czech Republic and Mexico.
S&P Global in June said Capitec’s business model was resilient, weathering economic cycles and the weak SA economy.
With Jacob Webster
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.