By Peet Serfontein & Khumbulani Kunene
We initiate a long position. Our upside target is set at R379. We recommend a stop-loss at R312.
Mondi is an international paper and packaging group, with production operations in over 30 countries. The group's key operations are in central Europe and South Africa.
Mondi tends to be more resilient to economic cyclicality through its focus on corrugated boxes, which are primarily used in defensive sectors such as food, beverages, and fast-growing areas like e-commerce. The company is our preferred counter in the sector for the long term.
Technically, a developing inclining channel pattern presents an attractive investment opportunity (see the black parallel trendlines on the main chart).
The pattern is characterised by a series of higher highs and higher lows - the lower boundary acts as a support level, preventing the price from falling further, while the upper boundary acts as a resistance level, where the price tends to pull back after reaching it. An inclining channel often indicates a continuation of the prevailing upward trend - a bullish signal.
The insert on the graph shows the price distribution for the share over the last five years. The highest bar in a price distribution often represents a High Volume Node (HVN) or the Point of Control (POC). This is the price level where the highest trading activity has occurred over the specified period and can be indicative of strong bullish support.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R535. This classifies our profit target of R388 as realistic.
We suggest a medium capital at-risk allocation to this trade.
Share Information
| Share Code | MNP |
|---|---|
| Industry | Paper & Forestry |
| Market Capital (ZAR) | 151.3 billion |
| One Year Total Return | 18.7% |
| Return Year-to-Date | -2.2% |
| Current Price (ZAR) | 343.30 |
| 52 Week High (ZAR) | 378.09 |
| 52 Week Low (ZAR) | 281.29 |
| Financial Year End | December |
| The share is testing its 200-day simple moving average (SMA) - a breach will be regarded as a bullish signal. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (EUR) | 1.12 | 1.02 | 1.41 | 1.64 |
| Growth (%) | -8.93 | 38.31 | 16.55 | |
| Dividend Per Share (EUR) | 0.77 | 0.69 | 0.74 | 0.81 |
| Growth (%) | -10.26 | 6.66 | 9.91 | |
| Forward PE (times) | 16.90 | 12.22 | 10.49 | |
| Forward Dividend Yield (%) | 4.02 | 4.28 | 4.71 | |
| Earnings are expected to show a pull-back in the short term, but growth is expected to rebound strongly over the forecast horizon. | ||||
Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | NRP - BUY (Continue to hold) | WHL - BUY - Buy (Continue to hold) | OMU - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 131.00 | 60.82 | 11.99 |
| Current | 141.50 | 65.32 | 12.70 |
| Movement | 8% | 7.4% | 5.9% |
|
An inclining channel pattern remains of interest. Upside price momentum is supportive. The stock remains above its 200-day simple moving average.
Our profit target is R146 with a trailing stop-loss at R135.50. Exit the trade on 9 September 2024. |
A price that appears to be building a base remains of interest. Remains just above its 200-day simple moving average. Upside price momentum is a positive takeaway.
Our take profit target is R71 with a trailing stop-loss level at R60.90. Exit the trade on 25 November 2024. |
A price building a base remains of interest. Upside price momentum is supportive. Trade continues just above the 200-day simple moving average.
Our profit target is at R14, with a trailing stop-loss at R11.85. Exit the trade on 16 September 2024. |
| Share Name and position | DCP - Buy (Continue to hold) | SHP - Buy (Continue to hold) | TBS - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 34.52 | 292.78 | 224.91 |
| Current | 36.52 | 307.69 | 232.96 |
| Movement | 5.8% | 5.1% | 3.6% |
|
The stock continues to display higher highs and higher lows and remains above its 200-day simple moving average. Upside price momentum has halted which introduces some concern.
Our profit target is R39 with a trailing stop-loss at R34.70. Exit the trade on 23 September 2024. |
Low volatility remains of interest. The stock remains above its 200-day simple moving average. Fading upside price momentum, however, is a concern.
Our profit target is at R317, with a trailing stop-loss at R279. Exit the trade on 1 September 2025. |
A price at major resistance is of interest. Remains just above its 200-day simple moving average. Upside price momentum supports the trade.
Our profit target is at R260, with a trailing stop-loss at R208. Exit the trade on 28 April 2025. |
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