What now for Truworths as MultiChoice takes its place?


What now for Truworths as MultiChoice takes its place?

The JSE listing of the subscription TV service company has pushed the fashion retailer out of the top 40 index

Karl Gernetzky

The unceremonious dumping of Truworths from the JSE top 40 index is yet another blow for a company that has shed 16% of its value so far this year.
The unbundling of MultiChoice from Naspers this week resulted in the subscription TV service company listing with a market capitalisation of R46.5bn, easily eclipsing Truworths’ R33bn and seeing the clothing retailer ousted.
In the short term, this will result in a rebalancing by tracker funds, which will automatically sell stock in Truworths as they will be required to dispose of shares that are not in the top 40 index. Truworths will also not benefit from automatic buying from passive investment vehicles. Although this is not ideal for the retailer, over the longer term it will likely adjust as active investors seeking underlying value will still pour in.
SA retailers are under severe strain as tepid economic growth and government tax hikes drain consumer spending. The 16% loss in the Truworths share price in 2019 is bigger than that of the JSE general retailer index, which recorded a 9.29% drop. Nevertheless, the company is only the third-worst performing share on that index, trailing Woolworths and Massmart.
Truworths remains a solid business, pleasing the market with its results for the six months to end-December. Despite pressure in its UK market, where it faces stiff competition from online retailers, Truworths continues to expand and has launched an e-commerce platform. All in all, it looks set to continue delivering solid results despite a less than perfect operating environment.

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