Absa Group is one of South Africa's largest financial services groups offering a complete range of banking, assurance and wealth management products and services. Absa holds a presence in 15 countries across the African continent.
Absa trades at a substantial discount to its peers on a price to book ratio of 1.0 times (sector average: 1.5 times).
Technically, a price at the lower range of an inclining channel pattern makes the share attractive as an investment opportunity (see the black parallel trendlines on the main chart).
The pattern is formed by parallel trendlines sloping upward, with the lower trendline acting as a level of support and the upper trendline acting as a level of resistance. The price tends to oscillate between these trendlines, which is supportive of a bullish trend.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R230. This classifies our profit target of R195 as realistic.
We suggest a medium capital at-risk allocation to this trade.
Share Information
| Share code | ABG |
|---|---|
| Industry | Banks |
| Market Capital (ZAR) | 143.11 billion |
| One year total return | 15.38% |
| Return year-to-date | -9.73% |
| Current price (ZAR) | 168.81 |
| 52 week high (ZAR) | 211.00 |
| 52 week low (ZAR) | 150.02 |
| Financial year end | December |
| Closing paragraph | The share remains below its 200-day simple moving average of ~R180. Year-to-date performance provides a decent entry point. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 25.17 | 27.41 | 30.35 | 33.07 |
| Growth (%) | 12.25 | 12.07 | 8.37 | |
| Dividend Per Share (ZAR) | 13.00 | 14.59 | 16.35 | 17.72 |
| Growth (%) | 12.25 | 12.07 | 8.37 | |
| Forward PE (times) | 6.16 | 5.56 | 5.10 | |
| Forward Dividend Yield (%) | 8.64 | 9.69 | 10.50 | |
| Closing paragraph | Earnings growth is expected to be solid over the forecast horizon. Dividend growth is very attractive. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position |
TFG - Buy (Continue to hold) |
OMU - Buy (Continue to hold) |
MTN - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 83.54 | 11.67 | 132.49 |
| Current | 94.00 | 12.06 | 133.93 |
| Movement | 12.5% | 3.3% | 4.3% |
| Summary text |
The stock continues to trade below its 200-day simple moving average. Upside price momentum is supportive of the trade idea.
Our profit target is R132, with a trailing stop-loss of R75.50. Exit the trade around 8 July 2024. |
We are closely monitoring the price as it defies the prevailing bearish trend. The share continues to stay above its 200-day simple moving average.
Our profit target is R16, with a trailing stop-loss at R10.20. Exit the trade around 17 November 2023. |
We continue to monitor the share price which suggests that the market may be entering stage 3 of the Elliot Wave pattern. The stock remains above its 200-day simple moving average. Upside momentum supports the bullish bias.
Our profit target is R190, with a trailing stop-loss at R113. Exit the trade around 6 November 2023. |
| Share Name and position |
INL - Buy (Continue to hold) |
BAT - Buy (Continue to hold) |
CFR - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 105 | 623.85 | 3060.92 |
| Current | 105.58 | 625.44 | 3050.63 |
| Movement | 0.6% | 0.3% | -0.3% |
| Summary text |
The price is noteworthy based on the RRG analysis, particularly due to its ability to stay above the 200-day simple moving average. In this case, fading downside price momentum supports the idea.
Our profit target is R121, with a trailing stop-loss at R99.30. Exit the trade around 7 August 2023. |
The price remains in an inclining channel pattern, which remains of interest. The share is below its 200-day simple moving average.
Our profit target is R693, with a trailing stop-loss at R599. Exit the trade around 18 September 2023. |
A price that is at the start of an impulse wave out of the Elliott wave theory remains of interest. Remains above its 200-day simple moving average.
Our profit target is R3 506, with a trailing stop-loss of R2 880. Exit the trade around 4 September 2023. |
