By Peet Serfontein & Zimele Mbanjwa.
Mr Price Group and its subsidiaries operate over 2 700 retail stores across southern Africa, focusing on clothing, footwear, accessories, and homeware across the value spectrum. These chains are divided into two operational divisions namely, apparel (Mr Price, Mr Price Sport, Miladys, Power Fashion and Studio 88) and home (Mr Price Home, Sheet Street, and Yuppiechef).
Technically, a dip in the price that appears to coincide with a trough in the business cycle makes for an attractive investment opportunity. In a trough (see the insert as well as the grey shaded area), economic activity is typically at its lowest. This period is often characterised by reduced consumer confidence and spending power. Investors expect lower future earnings, which can lead to share price weakness.
A trough in the business cycle can be regarded as bullish from a contrarian perspective. This is because expectations are that the business cycle will turn. This can result in renewed support for earnings and a commensurate increase in the share price.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R216.00, which classifies our profit target of R213.00 as realistic.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R169.
Share Information
| Share Code | MRP |
|---|---|
| Industry | Consumer Discretionary |
| Market Capital (ZAR) | 42.49 billion |
| One Year Total Return | -2.11% |
| Return Year-to-Date | 0.27% |
| Current Price (ZAR) | 157.24 |
| 52 Week High (ZAR) | 177.78 |
| 52 Week Low (ZAR) | 123.25 |
| Financial Year End | April |
| The share price has been under pressure over the past year; however, a recent recovery is encouraging. Expect moderate volatility in the price. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 11.78 | 12.17 | 13.92 | 14.84 |
| Growth (%) | 3.25 | 14.37 | 6.62 | |
| Dividend Per Share (ZAR) | 4.47 | 7.83 | 8.64 | 9.55 |
| Growth (%) | 75.17 | 10.28 | 10.55 | |
| Forward PE (times) | 12.92 | 11.30 | 10.60 | |
| Forward Dividend Yield (%) | 4.98 | 5.49 | 6.07 | |
| Good earnings growth is expected over the forecast horizon with an attractive dividend yield on a forward-looking basis. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | BID - Time exit (Close the position) |
APN - BUY (Continue to hold) |
MTN - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 422.56 | 182.66 | 102.08 |
| Current | 416.00 | 203.18 | 111.89 |
| Movement | -1.6% | 11.2% | 9.6% |
| We have closed the share position but are considering re-entering the trade at current levels. |
A price that appears to be developing a symmetrical triangle pattern remains of interest. Remains above its 200-day simple moving average. A pause in upside momentum is concerning.
Our profit target is R222, with a trailing stop-loss at R179. Exit the trade around 27 December 2024. |
A potential mean reversion trade remains of interest. The share is below its 200-day simple moving average. A pause in upside price momentum is a concern.
Our take profit target remains at R122 with a trailing stop-loss level at R94. Exit the trade around 19 February 2024. |
| Share Name and position | RDF - Buy (Continue to hold) |
CFR - Buy (Continue to hold) |
NTC - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 3.78 | 2 331.00 | 13.80 |
| Current | 3.99 | 2 402.02 | 13.71 |
| Movement | 5.6% | 3.0% | -0.7% |
|
A strategic investment opportunity. Continues to stay beneath its 200-day simple moving average.
Our take profit target remains at R4.50 with a trailing stop-loss level at R3.75. Exit the trade around 4 March 2024. |
A distinct upward trend continues to hold our attention. However, a pause in upside momentum is concerning. Continues to stay below its 200-day simple moving average.
Our profit target is R2 737, with a trailing stop-loss at R2 240. Exit the trade around 12 February 2024. |
A price break through key support and the formation of a potential stable base, is noteworthy. A pause in upside momentum is concerning. Continues to test its 200-day simple moving average.
Our take profit target remains at R15.50 with a trailing stop-loss level at R13.50. Exit the trade |
