We initiate a long position. Our upside target is R14 (risk-to-reward ratio of 2.6:1). We recommend a stop-loss at R11.70.
Growthpoint is an international property company with a vast portfolio of commercial, retail, and industrial properties across South Africa, Australia, Eastern Europe, and the United Kingdom. In addition to being the largest commercial property owner and developer in SA, Growthpoint is also the largest primary REIT (by market cap) listed on the JSE.
Recent growth for the company has been relatively soft, due to mixed performances from the various underlying assets (as well as the sectors in which they operate). For the half-year ended 31 December 2022, the company reported an increase in distributable income of just 1.5%. Nevertheless, growth is set to improve going forward, with an overall recovery supported by sustained momentum in SA retail trade, as well as the industrial sector.
In technical terms, the stock is trading in a narrow price range (see the grey rectangle on the main chart). Deviation of the stock price close to the lower end of this range indicates a potential bullish shift in the trend. This is due to the lower end being both an attractive entry point as well as a key support level, at which demand and hence buying pressure increases.
Trading at the lower end of the narrow price range also suggests that the stock is in an accumulation phase. During this phase, investors start accumulating shares at a discount, anticipating a future increase. These factors combined make the stock attractive as an investment opportunity.
The stock is trading just below its 200-day simple moving average of R12.60 and will attract strong buying interest at this level. This is another indicator of a bullish trend.
This trade idea is regarded as a speculative investment opportunity. This means that risk is heightened and the price will likely be volatile.
Share Performance
Share Information
| Share code | GRT SJ |
|---|---|
| Industry | Real Estate |
| Market Capital (ZAR) | 41.7 billion |
| One year total return | 2.71% |
| Return year-to-date | -12.27% |
| Current price(ZAR) | 12.16 |
| 52 weeek high(ZAR) | 15.09 |
| 52 week low(ZAR) | 11.36 |
| Financial year end | June |
| Closing paragraph | While staging a recovery more recently, the share price has been under pressure this year. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 2.32 | 1.55 | 1.60 | 1.71 |
| Growth (%) | -33.14 | 3.22 | 6.87 | |
| Dividend Per Share (ZAR) | 1.56 | 1.36 | 1.38 | 1.46 |
| Growth (%) | -12.85 | 1.99 | 5.78 | |
| Forward PE (times) | 7.84 | 7.59 | 7.10 | |
| Forward Dividend Yield (%) | - | 11.15 | 11.37 | 12.03 |
| Closing paragraph | Earnings are expected to be significantly weaker over the short term and this will impact the company's dividend pay-out. The market, however, expects a moderate recovery from FY24 and beyond. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view
| Share Name and position | SHP - Profit Take (Close the position) | TFG - BUY (Continue to hold) | BVT - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 202.97 | 83.54 | 245.36 |
| Current | 224.28 | 93.00 | 259.62 |
| Movement | 10.5% | 11.3% | 5.8% |
| Summary text | We suggest exiting the trade for an early profit to reduce overall portfolio exposure. |
The stock is trading below its 200-day simple moving average, though our bullish bias is supported by fading downside momentum. The bullish divergence indicator remains noteworthy.
Our profit target is R132, with a trailing stop-loss at R74.5. Exit the trade around 8 July 2024. |
The share price remains in an inclining channel pattern and is trading above its 200-day simple moving average. Fading downside momentum supports the bullish trend.
Our profit target remains at R278, with a trailing stop-loss of R247.50. Close the position around 14 August 2023. |
| Share Name and position | INL - BUY (Continue to hold) | BAW - BUY (Continue to hold) | MTN - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 105.00 | 85.56 | 132.49 |
| Current | 109.93 | 89.06 | 136.64 |
| Movement | 4.7% | 4.1% | 3.1% |
| Summary text |
The price has progressed to the “leading” quadrant out of the RRG analysis and remains of interest. The share remains above its 200-day simple moving average. Fading downside momentum supports the bullish trend.
Our profit target is R121, with a trailing stop-loss at R104. Exit the trade around 7 August 2023. |
The stock is trading below its 200-day simple moving average though fading downside momentum remains supportive.
Our profit target remains at R104, with a trailing stop-loss at R81. Close the position around 3 July 2023. |
We continue to monitor the share price which suggests that the market maybe entering stage 3 of the Elliot wave pattern. The stock is testing its 200-day simple moving average. Emerging upside momentum supports a bullish bias.
Our profit target is R190, with a trailing stop-loss at R113. Exit the trade around 6 November 2023. |
