Peet Serfontein & Jalpa Bhoolia.
Santam opened its doors in May 1918 and is one of South Africa's leading short-term insurers. It operates in South Africa, Namibia and selected emerging markets through a network of intermediaries, direct and partnership channels. Santam's portfolio of insurance products includes personal, commercial, and specialist lines as well as reinsurance. Santam is a subsidiary of South African financial services group Sanlam, which holds the majority of Santam's shares.
Technically, a share that appears to be in an incomplete cup and saucer pattern makes for a compelling investment opportunity (see the overlay on the chart).
This pattern is characterised by a downtrend followed by a period of stabilisation and then an upward trend, thus forming the shape of a cup. The saucer (also called the handle) forms after the cup, when the price consolidates or moves slightly downward, creating a small pullback before resuming upward momentum.
The cup and saucer pattern represents a period of consolidation followed by a breakout. The initial decline reflects a period of selling, which is then outweighed by buying interest as the share price begins to recover, indicating growing optimism - a bullish signal.
The share also seems to be in a markup phase. This signifies a period where the price of the share is on an upward trajectory after a period of consolidating or accumulation at relatively lower price levels, indicating a shift in investor sentiment from bearish or neutral to bullish.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R305.
Share Information
| Share Code | SNT |
|---|---|
| Industry | Insurance |
| Market Capital (ZAR) | 33.97 billion |
| One Year Total Return | 14.99% |
| Return Year-to-Date | 2.97% |
| Current Price (ZAR) | 295.08 |
| 52 Week High (ZAR) | 310.00 |
| 52 Week Low (ZAR) | 234.97 |
| Financial Year End | December |
| The share price appears to be in an uptrend over the past four months. Technical indicators are supportive of further upside. The share remains above its 200-day simple moving average of ~R286.65. Expect moderate volatility in the share price. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 18.03 | 22.13 | 26.61 | 29.57 |
| Growth (%) | 22.73 | 20.25 | 11.13 | |
| Dividend Per Share (ZAR) | 13.07 | 19.19 | 14.77 | 16.04 |
| Growth (%) | 46.80 | -23.01 | 8.61 | |
| Forward PE (times) | 13.34 | 11.09 | 9.98 | |
| Forward Dividend Yield (%) | 6.50 | 5.01 | 5.44 | |
| The earnings growth outlook is strong, with the dividend yield expected to be fairly stable. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | APN - BUY (Continue to hold) |
MRP - BUY (Continue to hold) |
RDF - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 182.66 | 157.50 | 3.78 |
| Current | 199.19 | 169.52 | 4.00 |
| Movement | 9% | 7.6% | 5.8% |
|
A developing symmetrical triangle pattern remains of interest. Trades above its 200-day simple moving average. Downside price momentum is concerning.
Our profit target is R222, with a trailing stop-loss at R175 Exit the trade on 27 December 2024. |
A price coinciding with a trough in the business cycle remains of interest. Upside price momentum has halted. Trading above its 200-day simple moving average.
Our take profit target remains at R213 with a trailing stop-loss level at R146.50. Exit the trade on 7 April 2024. |
A strategic investment opportunity. Continues to stay above its 200-day simple moving average. Fading upside momentum is concerning.
Our take profit target remains at R4.50 with a trailing stop-loss level at R3.75. Exit the trade on 4 March 2024. |
| Share Name and position | BTI - BUY (Continue to hold) |
TFG - BUY (Continue to hold) |
OUT - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 562.87 | 111.64 | 42.50 |
| Current | 574.75 | 108.10 | 40.35 |
| Movement | 2.1% | -3.2% | -5.1% |
|
A price that is testing the lower range of an inclining channel pattern remains of interest. Upside price momentum is supportive. However, remains below its 200-day simple moving average.
Our take profit target remains at R645 with a trailing stop-loss level at R551. Exit the trade on 22 April 2024. |
A price that is in the markup phase out of the market cycle remains of interest. Upside price momentum is a highlight. Remains above its 200-day simple moving average.
Our take profit target remains at R132 with a trailing stop-loss level at R104. Exit the trade on 17 July 2024. |
A consistent uptrend is attractive. Downside price momentum continues to be a concern. The share remains just above its 200-day simple moving average.
Our take profit target remains at R50 with a trailing stop-loss level at R39.70. Exit the trade on 6 May 2024. |
