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PEPKOR HOLDINGS LIMITED

PPH JSE Listed

Investment Analysis: Pepkor Holdings Limited (JSE: PPH)

Date: 9 January 2026 Share Price: ~R26.28 (2,628c) Analyst Role: Senior Equity Analyst, JSE

Step 1: Data Gathering & Source Verification

I have reviewed the most recent financial disclosures and SENS announcements, noting the release of strong annual results in late November 2025.

  • Annual Results: Reviewed the Audited Annual Financial Statements for the year ended 30 September 2025 (Released 25 November 2025).
  • Interim Results: Reviewed the Unaudited Interim Results for the six months ended 31 March 2025 (Released 27 May 2025).
  • SENS Activity (L12M): Key announcements include the acquisition of Cloudbadger (fintech), the approval of a banking license application (Section 13 approval), and the continued expansion of the Flash business.

Data Sources:

  • Annual Results (Sep 2025): https://www.pepkor.co.za/wp-content/uploads/Pepkor-short-form-for-the-year-ended-30-September-2025.pdf
  • SENS Announcement (Dividend): https://www.sharedata.co.za/v2/Scripts/News.aspx?c=PPH&x=JSE (Ref: Announcement dated 25 November 2025)

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R97.1 Billion | A heavyweight in the JSE General Retailers index. | | Dividend Yield (L12M) | ~2.0% | Low. The company declared an annual dividend of 53.0 cents (up from 48c). Pepkor typically prioritizes capital reinvestment (store rollout + acquisitions) over high payouts, resulting in a lower yield than peers like TFG or Truworths. | | Liquidity Check | Highly Liquid | Average daily volume is ~12.5 million shares (Value > R300m/day). It is one of the most liquid stocks on the exchange. | | P/E Ratio | ~16.3x | Moderate. Based on FY2025 Headline Earnings Per Share (HEPS) of 161.0 cents. This rating reflects the market's appreciation of its defensive nature and fintech growth potential. | | Net Asset Value (NAV) | ~R18.50 per share | The stock trades at a premium to book value (~1.4x P/B), justified by its high Return on Equity (ROE) and intangible brand value. |

Step 3: Operational & Strategic Analysis

Business Overview Pepkor is the largest non-grocery retailer in Africa, dominating the "discount/value" segment.

  • Core Retail: Brands include PEP, Ackermans, Tekkie Town, and the newly acquired Choice Clothing.
  • Fintech: This is the hidden jewel. The Flash business (informal traders) and Capfin (lending) are growing at double digits.
  • Strategic Pivot: Pepkor is aggressively transitioning from a pure retailer to a "Fintech-enabled Retailer." The acquisition of Cloudbadger and the move toward a full banking license signal an intent to monetize their massive customer base (8 out of 10 prepaid phones in SA are sold by Pepkor).

Performance Trend

  • Revenue: Robust Growth. Group revenue increased 12.0% to R95.3 billion (FY2025).
  • Earnings: Strong. HEPS increased 14.8% to 161 cents.
  • Drivers: The "Two-Pot" retirement system withdrawals in late 2025 provided a tangible boost to consumer spending in Pepkor's core market. Additionally, the Fintech segment grew revenue by 31%, becoming a material contributor to group profits.

Sector Context

  • Consumer Health: While the middle class remains squeezed, Pepkor's "defensive" value proposition allows it to trade down effectively.
  • Inflation: Falling inflation in late 2025 has been a tailwind for low-income consumers, increasing disposable income for discretionary clothing purchases.

Step 4: The Verdict

Bull Case (Why Buy): The Fintech "Trojan Horse." Pepkor is effectively a bank disguised as a retailer. With 8/10 prepaid handsets sold in SA and the Flash machine network dominating the informal economy, they have lower customer acquisition costs than Capitec or TymeBank. The move to obtain a banking license creates a long-term growth runway that pure clothing retailers lack. The "Two-Pot" liquidity injection will continue to support sales into H1 2026.

Bear Case (Why Sell): Credit Risk & Banking Complexity. Moving into banking brings regulatory scrutiny and execution risk. As the credit book grows (Credit sales mix increased to 16%), Pepkor becomes more sensitive to the bad debt cycle. Additionally, with a dividend yield of only ~2%, it offers little income protection if the share price stagnates.

Fair Value Estimate: R30.00 - R32.00 Implies a re-rating to ~18-19x P/E, aligned with high-growth defensive retailers.

Final Rating: BUY Pepkor offers the best "defensive growth" profile in the sector. The Fintech optionality is not yet fully priced in.

AI Generated Analysis Last Updated: 2026-01-14