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CLICKS GROUP LIMITED

CLS JSE Listed
Market Cap
R81.1 Billion

Step 1: Data Gathering & Source Verification

Reporting Periods Used:

Step 2: Metric Extraction

  • Market Cap: R81.1 Billion

  • Calculation: Share price (c. R345.19) Shares in issue (~235m).

  • Dividend Yield (L12M): 2.57%

  • Calculation: Total FY2025 Dividend (886 cents) / Current Share Price (34519 cents).

  • Note: The group maintains a consistent payout ratio of 65%.

  • Liquidity Check: Pass (High Liquidity)

  • Data: Average daily value traded is approximately R255 million. This is a JSE Top 40 constituent with deep liquidity; no execution risk for standard retail sizing.

  • P/E Ratio: 25.3x

  • Calculation: Current Price (34519c) / Diluted HEPS (1362c).

  • Net Asset Value (NAV): N/A

  • Reasoning: Clicks is a retailer, not a property holding company. P/E is the primary valuation metric. (For reference, NAV per share is 2907 cents).

Step 3: Operational & Strategic Analysis

Business Overview Clicks Group is a defensively positioned healthcare and beauty retailer. It operates through two primary segments:

  1. Retail (Clicks): The largest pharmacy network in SA (approx. 780 pharmacies) and front-shop retailer of health, beauty, and wellness products.
  2. Distribution (UPD): The country's leading full-line pharmaceutical wholesaler, supplying Clicks stores, major private hospital groups, and independent pharmacies.

Performance Trend (FY2025 vs Prior)

  • Trend: Steady & Defensively Robust.
  • Revenue: Group turnover increased by 5.3% to R47.8bn.
  • Margins: Operating margin expanded by 60 basis points to 9.8%. This is a key bullish signal, largely driven by the high margin contribution of Private Label products (now 25.9% of sales).
  • Earnings: Diluted HEPS up 14.1%, continuing a multi-year trend of double-digit earnings growth despite a stagnant local economy.

Sector Context

  • Macro Factor: National Health Insurance (NHI) & Regulatory Pricing. The primary headwind for the sector is legislative uncertainty regarding the NHI and the "Single Exit Price" (SEP) regulations for medicines. While Clicks has scale to navigate this, the sector faces constant pressure on dispensing fees, forcing reliance on "Front Shop" (beauty/toiletries) sales for margin expansion.

Step 4: The Verdict

Bull Case (Why Buy) Operational "Moat" & Efficiency: Clicks is arguably the highest-quality defensive stock on the JSE. Its Return on Equity (ROE) of 49.2% is industry-leading. The integrated model (owning both the retail outlet and the wholesaler UPD) allows for superior margin control compared to peers. In a high-inflation environment, their ability to grow volume via private label products is a significant competitive advantage.

Bear Case (Why Sell) Valuation Ceiling: The stock is priced for perfection at a 25.3x P/E. This is a significant premium to the JSE All Share Index and its retail peers. If growth slows from "double-digit" to "high single-digit," the market could aggressively de-rate the multiple down to 18x-20x, resulting in significant capital loss despite solid operational performance.

Fair Value Estimate R380.00 – R410.00

  • Methodology: Blended valuation using a Forward P/E of 22x (applying a slight discount to current multiples to account for macro risk) on forecast FY2026 earnings.

Final Rating: HOLD

  • Summary: Clicks is a "Quality" company at a "Full" price. It is an excellent long-term compounder, but the current entry point (R345) offers limited margin of safety relative to its high valuation. Existing holders should stay invested for the dividend and defensive stability, but new capital should wait for a pullback to the R320 level.
AI Generated Analysis Last Updated: 2026-01-14