Clicks Group is a health and beauty focused retail and supply group. The group has hundreds of stores across southern Africa through its market-leading retail brands, Clicks and The Body Shop. United Pharmaceutical Distributors (UPD) provides distribution capability for the group's healthcare strategy and has close to a third of market share in private pharmaceutical wholesale in South Africa.
Clicks is a defensive company and is characterised by growth, high return on equity (ROE), strong cash conversion and execution.
Technically, a price above key support and the development of a falling wedge pattern makes for an attractive investment opportunity (see the black support line and the converging dotted black trendlines on the main chart).
An incomplete falling wedge pattern is considered bullish, particularly in a downtrend. The converging trendlines (even if not fully completed), suggests a potential change in momentum. Therefore, as the wedge develops, the price range contracts, indicating decreasing downward momentum and potential for a trend reversal.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R450. This classifies our profit target of R296 as realistic.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R264.
Share Performance
Share Information
| Share code | CLS |
|---|---|
| Industry | Consumer Staples Distribution |
| Market Capital (ZAR) | 61.72 billion |
| One year total return | -6.16% |
| Return year-to-date | -2.35% |
| Current price(ZAR) | 257.48 |
| 52 week high(ZAR) | 318.80 |
| 52 week low(ZAR) | 232.63 |
| Financial year end | August |
| Closing paragraph | Several technical indicators suggest upside potential. The stock remains below its 200-day simple moving average of ~R263 to R264. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 10.80 | 10.24 | 11.34 | 12.65 |
| Growth (%) | -5.16 | 10.74 | 11.50 | |
| Dividend Per Share (ZAR) | 6.37 | 6.44 | 7.11 | 7.97 |
| Growth (%) | 1.13 | 10.43 | 12.09 | |
| Forward PE (times) | 25.13 | 22.70 | 20.36 | |
| Forward Dividend Yield (%) | - | 2.50 | 2.76 | 3.10 |
| Closing paragraph | While earnings are expected to be constrained over FY23, growth is expected to pick up over FY24. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view
| Share Name and position | ANH - Stop-loss (Close the position) | INL - BUY (Continue to hold) | DCP - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 1 061.16 | 105.00 | 24.12 |
| Current | 1 011.65 | 107.06 | 24.15 |
| Movement | -4.7% | 2% | 0.1% |
| Summary text | The stock breached our stop-loss level, leading us to close the position. |
Based on the RRG analysis, the share remains attractive (particularly due to its ability to stay above the 200-day simple moving average). Downside momentum is a concern.
Our profit target is R121, with a trailing stop-loss at R101. Exit the trade around 30 October 2023. |
The price exhibits early signs of a bullish divergence, thus suggesting an attractive investment opportunity. The share remains below its 200-day simple moving average, indicating a counter-trend trade possibility.
Our profit target is R29, with a trailing stop-loss at R22. Exit the trade around 29 December 2023. |
| Share Name and position | BVT - BUY (Continue to hold) | LHC - BUY (Continue to hold) | STXRES - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 272.78 | 20.53 | 59.63 |
| Current | 272.86 | 20.26 | 61.42 |
| Movement | 0% | -1.3% | -2.7% |
| Summary text |
The price appears stable and consistent and remains of interest, however downside price momentum is a concern. The stock is trading above its 200-day simple moving average.
Our profit target is R310, with a trailing stop-loss at R258. Exit the trade around 11 December 2023. |
The price appears to be in the upper range of a declining channel pattern. The share remains above its 200-day simple moving average. Downside momentum remains a concern.
Our profit target is R27, with a trailing stop-loss at R18. Exit the trade around 6 November 2023. |
The ETF is trading at some major support or in an accumulation phase t. Remains below the 200-day simple moving average. Downside momentum is concerning.
Our profit target is R69, with a trailing stop-loss at R56. Exit the trade around 8 January 2024. |
