Bloomberg News

Wal-Mart’s Massmart Falls as Deutsche Cuts Recommendation

January 16, 2012

(Updates with closing share price in second paragraph.)

Jan. 13 (Bloomberg) -- Massmart Holdings Ltd., a South African retailer controlled by Wal-Mart Stores Inc., fell for the first time in nine trading days after Deutsche Bank AG cut its recommendation on the stock to “sell” from “hold.”

Massmart declined 2.2 percent to 178.76 rand at the close in Johannesburg, the biggest drop in three months. Deutsche Bank’s 12-month price estimate is 140 rand.

While Massmart may benefit from “potential synergies from a Wal-Mart tie-up,” Deutsche Bank has concerns about near-term earnings from “potentially aggressive discounting to pursue market share” and “the potential drag on earnings from a significant investment in supply chain and organic growth,” Nick Higham, a Johannesburg-based analyst, wrote in a note dated yesterday.

Deutsche Bank’s downgrade means only two of 14 analysts monitored by Bloomberg don’t have a “sell” recommendation on Massmart. None recommend buying the shares.

Bentonville, Arkansas-based Wal-Mart, the world’s biggest retailer, bought Massmart in June for 16.5 billion rand ($2.05 billion). Sales in the 26 weeks ended December increased 15 percent to 31.6 billion rand, Massmart said Jan. 11.

--Editors: Paul Jarvis, David Risser

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.


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