By Peet Serfontein, Jalpa Bhoolia
Shoprite Holdings is an investment holding company whose combined subsidiaries constitute the largest fast-moving consumer goods (FMCG) retail operation on the African continent.
Geographically, the group enjoys a presence in several countries across Africa through their various brands including Shoprite, Checkers, Usave, OK, House & Home and Hungry Lion.
Technically, a price in a developing rising wedge pattern presents an interesting investment opportunity (see the black converging trendline on the main chart).
The pattern is typically considered bearish because it often precedes a reversal in an uptrend. However, if prices break upward out of the wedge, it can be interpreted as a bullish signal. This upward breakout might indicate strong buying pressure and a potential continuation of the uptrend.
If the wedge forms in a long-term bull market, investors might search for potential bullish breakouts, thus interpreting the wedge as a consolidation pattern rather than a reversal pattern.
The insert on the graph shows the average monthly returns for the share since 2000. Positive returns for the most part of the year (10 out of 12 months) underscores the stable and consistent share performance - another bullish takeaway.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R320. This classifies our profit target of R295 as realistic.
We suggest a low to medium capital at-risk allocation to this trade.
Share Information
| Share Code | SHP |
|---|---|
| Industry | Food & Staples Retailing |
| Market Capital (ZAR) | 151.77 billion |
| One Year Total Return | 29.61% |
| Return Year-to-Date | -5.68% |
| Current Price (ZAR) | 256.66 |
| 52 Week High (ZAR) | 278.29 |
| 52 Week Low (ZAR) | 191.65 |
| Financial Year End | July |
| The share appears to be on an upward trajectory, particularly over the past month, and the current share price still makes for an attractive entry point. The price is testing its 200-day simple moving average. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 11.54 | 12.55 | 14.07 | 16.10 |
| Growth (%) | 8.71 | 12.13 | 14.40 | |
| Dividend Per Share (ZAR) | 6.63 | 7.18 | 8.05 | 9.18 |
| Growth (%) | 8.28 | 12.10 | 14.10 | |
| Forward PE (times) | 20.45 | 18.24 | 15.94 | |
| Forward Dividend Yield (%) | 2.80 | 3.14 | 3.58 | |
| Earnings growth is expected to remain very solid over the forecast horizon. | ||||
Buy/Sell Rationale:
Technical Analysis:
Long-term fundamental view:
| Share Name and position | MRP - BUY (Continue to hold) | SLM - Buy (Continue to hold) | MNP - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 157.50 | 64.61 | 332.67 |
| Current | 181.61 | 70.72 | 364.09 |
| Movement | 15.3% | 9.5% | 9.4% |
|
A price coinciding with a trough in the business cycle remains of interest. The start of upside price momentum supports the trade strategy. The price remains above its 200-day simple moving average.
Our take profit target remains at R213 with a trailing stop-loss level at R158.60. Exit the trade on 7 April 2025. |
A price above key support remains of interest. Fading downside price momentum supports the trade strategy. Remains just above the 200-day simple moving average.
Our take profit target remains at R74 with a trailing stop-loss level at R67.10. Exit the trade on 10 June 2024. |
A share trading in a well-defined price range remains of interest. Upside price momentum is supportive. The price remains above its 200-day simple moving average.
Our take profit target remains at R379 with a trailing stop-loss level at R345.50. Exit the trade on 17 June 2024. |
| Share Name and position | INL - Buy(Continue to hold) | DCP - Buy(Continue to hold) |
|---|---|---|
| Entry | 120.71 | 32.49 |
| Current | 125.20 | 33.00 |
| Movement | 3.7% | 1.6% |
|
A share that is in a developing rising wedge pattern remains of interest. Fading downside price momentum is a positive takeaway. Remains above its 200-day simple moving average.
Our take profit target remains at R137 with a trailing stop-loss level at R118.50. Exit the trade on 29 July 2024. |
The share is in a developing symmetrical triangle pattern. Muted downside price momentum is supportive. Remains above its 200-day simple moving average.
Our take profit target remains at R37 with a trailing stop-loss level at R31.40. Exit the trade on 1 July 2024. |
FNB Stockbroking and Portfolio Management (Pty) Ltd, a subsidiary of FirstRand Bank Limited, an authorised Financial Services Provider and authorised user of the JSE limited (Reg no: 1996/011732/07). This Publication note is issued by FNB Stockbroking and Portfolio Management (Pty) Ltd for the information of clients only and should not be produced in whole or part without prior permission. Although FNB Stockbroking and Portfolio Management (Pty) Ltd is an Authorised Financial Services Provider, any opinions and/or analysis contained in this Publication are for informational purposes only and should not be considered advice, including but not limited to financial, legal or tax advice, or a recommendation to invest in any security or to adopt any investment strategy. The information contained herein has been obtained from sources/persons which we believe to be reliable but is not guaranteed for correctness, completeness or otherwise and we do not assume liability for loss arising from errors in the information or that may be suffered from using or relying on the information contained herein irrespective of whether there has been any negligence by us, our affiliates or any other employees of us, and whether such losses be direct or consequential. As market and economic conditions are subject to rapid change, any comments, opinions and analysis is rendered as of the date of publishing and may change without notice. Such changes may have a material impact on the outcome of any investment. Securities involve a degree of risk and are volatile instruments. Past performance is not indicative of future performances. Securities or financial instruments mentioned in the Publication note may not be suitable for all investors and FNB Stockbroking and Portfolio Management (Pty) Ltd has bares no responsibility whatsoever arising from or as a consequence hereof. The material is not intended as a complete analysis of every material fact regarding any share, instrument, sector, region, market, country, investment or strategy. The recipient of this Publication must make their own investment decision and is advised to contact his relationship manager for a personal financial analysis prior to making any investment decisions. Copyright 2018 by FNB Stockbroking and Portfolio Management (Pty) Ltd.
