GEMS FIRST TO MARKET

Research evidence excerpt

GEMS FIRST TO MARKET

Global Equity Research AC Global Equity Research

04 August 2026 J P M O R G A N

gr_publications@jpmorgan.com

adoption. Cogna is likely to have strong cash flow generation for the quarter, on late PNLD revenue recognition and collections.

We continue to favor Yduqs in the sector, due to solid free cash flow generation and a well-developed capital allocation policy.

We now call the bottom in SA general retail (Inga Q Galeni/David Aserkoff, CFA/Shaun Chauke), South Africa

SA retailers have priced in upcoming EPS downgrades in our view, further price reaction will be

muted

With General Retailers now among the cheapest sectors on the JSE and price action having moved well ahead of EPS

downgrades, we are calling the bottom and upgrading our UW rating (one of our better calls in a low-conviction year)

to N within our SA Strategy allocation. We would fund this trade by shorting Drug Retailers within the Staples Index while

staying long SHP/BID – both names that appear in our SA Strategy Top Picks. This is despite the weak macro backdrop,

ongoing wallet displacement towards online gambling (R75bn) and the impact of Chinese e-commerce players on price

perception and sector margins (R8.2bn) (see our note). The data support the view that the sell-off has become increasingly

price-driven. Over the past 12 months, SA retailer EPS has contracted by c. 10% while share prices have fallen c. 23%,

implying a punishment ratio of c.2.3x. This also aligns with our roadshow feedback: buy-side expectations have already

been reset materially lower, while sell-side forecasts still appear to lag, with consensus earnings estimates across our

coverage still c. 5% too high versus where investor expectations have moved. On a shorter three-month view, earnings