Trade Idea - Shoprite (SHP)

From a fundamental perspective, I see SHP as a buy.

This year has been hard on SA consumers so far. With an increase in tax, SA consumers are left with a lower disposable income. Inflation is going up, so are interest rate. Never the less, food remains a necessity and therefore we remain confident that food remains a good investment in times of financial difficulty.

Shoprite’s internal inflation was at around 7% a year ago before plunging into negative territory on the back of a stronger ZAR and decreasing global soft commodity prices.

Due to the retail nature of SHP, we remain of our perspective that SHP will continue to take market share and accumulate positive returns for investors and any short-term pullback can be seen as a good entry point to go long in the medium to long term.

Here is what we plan to do:

Buy SHP @ 212-214

TP @ R232

SL @ R205