FUNDVIEW-Investec prefers S.African retailer Clicks
* Clicks earnings likely to grow by 20 pct annually
* Also likes Steinhoff
* Resources shares too expensive
JOHANNESBURG, Nov 3 (Reuters) - South Africa's Investec Asset Management is betting on Clicks (CLSJ.J) and believes the retailer's earnings can grow by 20 percent annually over the next three years due to its expansion strategy.
Chris Freund, portfolio manager of the Investec Balance Fund, which has 23 billion rand ($2.90 billion) under management, said Clicks' decision to buy smaller independent pharmacies made it attractive.
"We think that Clicks earnings are going to go up by 20 percent per annum for the next three years. When that happens, over time the share tends to do well," Freund told Reuters on Tuesday.
"We particularly like the company Clicks, because of the structural moves in pharmacies in South Africa from being owned by individuals to being owned by corporates and the dominant corporate in this space is Clicks."
Clicks, whose shares have risen by about 50 percent over the last year, posted a 26.2 percent increase in full-year diluted headline earnings per share to 165.9 cents per share for the period to the end of August.
The group has 207 pharmacies and plans to add 30-40 pharmacies. Its customers are mainly female in the middle to upper income bracket.
Freund said global furniture retailer Steinhoff (SHFJ.J), whose shares have risen by about 29 percent over a year ago, was also a favourite due to its undervalued share and potential for growth.
"We think Steinhoff is very cheap or significantly undervalued. Very few of its profits come from South African retail. It's mostly European retail, both in Germany and the UK as well as furniture manufacturing," said Freund.
STEINHOFF ON THE PROWL?
Market speculation is that Steinhoff is eyeing Africa's biggest grocer Shoprite (SHPJ.J). But Freund said he was not worried about dilution which may come from any M&A activity from the furniture retailer. Continued...
