By Peet Serfontein, Zimele Mbanjwa
Formerly known as Sports Direct International, Frasers is one of the largest athletic, lifestyle and luxury apparel retailers in the UK. The company sells an extensive range of clothing, footwear, equipment, and accessories including renowned brands such as Nike, Adidas, Hugo Boss and even Gucci and Balenciaga.
Fundamentally speaking, the company has delivered impressive growth over the past five years, with the top-line improving ~10% and the bottom-line expanding ~37% on a compounded-annual basis. This has been driven by sustained demand across the portfolio (despite a few setbacks during the Covid-19 pandemic) as well as strategic business acquisitions in the industry.
Technically, the stock is forming a symmetrical triangle pattern within a broader upward trend (refer to the first chart) and this is seen as a bullish indicator. The pattern is characterised by the convergence of two opposing trendlines (one ascending and one descending), which connect a series of sequentially lower peaks and higher troughs. In essence this signifies a period of consolidation before an expected break toward the upside.
The stock is trading close to its 200-day simple moving average of ~£8.14 and we maintain a bullish stance
Fading downside momentum, according to the MACD indicator, is supportive of our bullish view, though downwards movement of the on-balance volume indicator is a slight concern.
Share Information
| Share Code | FRAS LN |
|---|---|
| Industry | Apparel Retailers |
| Market Capital (ZAR) | 3.6 billion |
| One Year Total Return | 1.84% |
| Return Year-to-Date | -11.97% |
| Current Price (USD) | 8.02 |
| 52 Week High (USD) | 9.43 |
| 52 Week Low (USD) | 6.61 |
| Financial Year End | April |
| The stock has come under a lot of pressure this year, though various technical indicators suggest an imminent recovery. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 0.95 | 0.86 | 0.97 | 1.09 |
| Growth (%) | -8.68 | 12.17 | 12.19 | |
| Dividend Per Share (USD) | - | - | - | - |
| Growth (%) | - | - | - | |
| Forward PE (times) | 8.32 | 7.42 | 7.38 | |
| Forward Dividend Yield (%) | - | - | - | |
| The bottom-line is expected to have moderated during FY24 (ending 30 April 2024). Nevertheless, the company is set to recover strongly in FY25 and beyond. | ||||
Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | BMY - Stop Loss (Close the position) | CVX - Buy (Continue to hold) | VWO - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 53.28 | 147.89 | 41.57 |
| Current | 50.29 | 161.89 | 42.42 |
| Movement | -5.6% | 9.5% | 2.0% |
| The stock has reached our stop-loss level and we exited the trade. |
The price is holding above key support. The stock remains above its 200-day moving average. Upside momentum remains supportive.
Our profit target is $167, with a stop-loss of $155.20. Exit the position around 28 June 2024. |
A developing symmetrical triangle remain remains of interest. The ETF is above the 200-day simple moving average and upside price momentum remains supportive.
Our profit target is $48, with a stop-loss of $41.40. Exit the position around 14 June 2024. |
| Share Name and position | BDX - Buy (Continue to hold) | VVX - Buy (Continue to hold) | PNW - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 239.07 | 45.19 | 73.02 |
| Current | 240.61 | 44.89 | 72.21 |
| Movement | 0.6% | -0.7% | -1.1% |
|
The presence of a well- established price range remains attractive. The stock remains below its 200-day moving average, with the counter-trend strategy remaining intact. Upside momentum has halted which is a concern
Our profit target is $265, with a trailing stop-loss of $231.30. Exit the position around 24 April 2024. |
The price is making higher lows and higher highs and thus remains of interest. The stock dipped below its 200-day moving average, with our counter-trend strategy remaining intact. Upside momentum has halted which is a concern.
Our profit target is $52, with a trailing stop-loss of $42.30. Exit the position around 10 July 2024. |
Price action developing a symmetrical triangle remain remains of interest. The stock remains below its 200-day moving average, and we maintain our counter trend strategy. Fading upside momentum is a concern.
Our profit target is $81, with a trailing stop-loss of $70. Exit the trade by 5 July 2024. |
