Our opinion on the current state of DCP

Dis-Chem Pharmacies, listed since November 2016, directly competes with Clicks in the pharmaceutical, medicine, and beauty products markets. Originally a family business controlled by the Saltzman family through Ivlyn, it saw a significant change in August 2021 when Ivlyn sold a portion of its stake, reducing the family's interest to 31.4%. This move aimed to diversify the company's ownership and expand its management and BEE consortium involvement.

At its listing, Dis-Chem aimed to exceed its 108 stores, a goal it has significantly surpassed, demonstrating its "blue sky" potential and ambitious expansion plans. This growth is partly driven by its objective to match or exceed Clicks’ footprint, which hinted at expanding up to 1200 stores. Dis-Chem's rapid expansion includes acquisitions like Springbok Pharmacy and Quenets, and the strategic purchase of Baby City for R430m in May 2020, enhancing its product synergy and expanding into healthcare insurance by acquiring a 25% stake in Kaelo Holdings.

For the six months ending in August 2023, Dis-Chem reported a 9.4% increase in revenue but a 17.2% decrease in HEPS, affected by economic constraints, higher interest rates, and load-shedding costs. Finance costs rose by 33.2%, with significant investments in tangible and intangible assets.

A trading update for the five months to January 2024 showed a 12.2% increase in revenue, with the wholesale business experiencing notable growth, especially from external customers. This performance underscores Dis-Chem's resilience and strategic expansion in the retail pharmacy sector.

Technically, Dis-Chem experienced a sideways and downward trend since April 2022 but began showing signs of an upward trajectory in November 2023. This movement suggests a potential recovery and continued growth for the company, making it a solid defensive investment with promising future prospects.