Peet Serfontein & Jalpa Bhoolia.
The Foschini Group is an investment holding company with a core business focus in retail and financial services. The group comprises several brands trading throughout southern Africa offering a prominent lifestyle range of household name brands including Foschini, @Home, Sterns, Totalsports, Sportscene and Jet, among others. The group also owns Phase Eight and Whistles in the UK, and RAG in Australia.
Fundamentally, the company is the market leader locally in 'Quick Response' and has the design and manufacturing capability to lead the market from a stock perspective. Geographic, product, and diversification across target markets adds a defensive component to the business. This company, along with its discretionary retail peers, could benefit from easier consumer conditions near term.
Technically, a share that appears to be in the markup phase makes for a good investment opportunity (see the insert on the main chart as well as the notation on the price action).
The Wyckoff Price Cycle consists of four main phases. The Accumulation phase occurs after the share has experienced a downtrend, whereby the price moves sideways and there is typically little buying interest. The Markup phase follows next, in which the price rises as demand increases. The share sustains its upward momentum, breaking out of the trading range. The share continues to make higher highs and higher lows, indicating a strong uptrend. The Distribution phase follows this - the price once again trades sideways, albeit at a higher level than in the Accumulation phase. Lastly, the Markdown phase occurs when the price falls as supply outweighs demand, triggering a downtrend.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R116.
Share Information
| Share Code | TFG |
|---|---|
| Industry | Consumer Discretionary |
| Market Capital (ZAR) | 36.38 billion |
| One Year Total Return | 8.06% |
| Return Year-to-Date | 0.46% |
| Current Price (ZAR) | 109.90 |
| 52 Week High (ZAR) | 119.13 |
| 52 Week Low (ZAR) | 81.00 |
| Financial Year End | March |
| The share remains above its 200-day simple moving average of ~R102.40. Expect moderate volatility in the share price. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 9.60 | 8.99 | 10.32 | 11.89 |
| Growth (%) | -6.43 | 14.85 | 15.18 | |
| Dividend Per Share (ZAR) | 3.20 | 3.23 | 3.97 | 4.92 |
| Growth (%) | 1.06 | 22.88 | 23.75 | |
| Forward PE (times) | 12.23 | 10.65 | 9.25 | |
| Forward Dividend Yield (%) | 2.94 | 3.62 | 4.47 | |
| Earnings could face some pressure in FY24 (to 31 March), before rebounding quite strongly in FY25. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | MTN - Stop-loss (Close the position) |
CFR - Take profit (Close the position) |
RDF - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 102.08 | 2 566.25 | 3.78 |
| Current | 93.23 | 2 897.11 | 4.10 |
| Movement | -8.7% | 12.5% | 8.5% |
| A stop-loss was triggered, and we closed the position. The prevailing bearish trend is significant. | We have taken early profit on the share and will consider re-entering the trade at a later stage. |
A strategic investment opportunity. Continues to stay above its 200-day simple moving average.
Our take profit target remains at R4.50 with a trailing stop-loss level at R3.85. Exit the trade on 4 March 2024. |
| Share Name and position | MRP - BUY (Continue to hold) |
APN - BUY (Continue to hold) |
BTI - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 157.50 | 182.66 | 562.87 |
| Current | 167.00 | 190.40 | 582.24 |
| Movement | 6.0% | 4.2% | 3.4% |
|
A price coinciding with a trough in the business cycle remains of interest. Upside price momentum is a positive. Trading above its 200-day simple moving average.
Our take profit target remains at R213 with a trailing stop-loss level at R144. Exit the trade on 17 April 2024. |
A developing symmetrical triangle pattern remains of interest. Trades above its 200-day simple moving average. Downside price momentum is concerning.
Our profit target is R222, with a trailing stop-loss at R166.30. Exit the trade on 27 December 2024. |
A price that is testing the lower range of an inclining channel pattern remains of interest. Upside price momentum is supportive. However, remains below its 200-day simple moving average.
Our take profit target remains at R645 with a trailing stop-loss level at R559. Exit the trade on 22 April 2024. |
