By Peet Serfontein & Jalpa Bhoolia
Vodacom is a leading African communications group providing converged mobile communications and related services across South Africa, Tanzania, the Democratic Republic of the Congo (DRC), Lesotho, Mozambique, Ethiopia, Kenya (via Safaricom), and Egypt (via Vodafone Egypt).
Vodacom is a market leader in most of the countries in which it operates and remains well-positioned for continued competitiveness. The business is highly cash-generative, which gives it the ability to pay consistent and high dividends.
Technically, a series of green Heikin-Ashi candles supports a bullish tone for the share. Heikin-Ashi candles identify trend strength and direction. A series of consecutive green Heikin-Ashi candles confirms a strong and sustained uptrend and are reflective of positive market sentiment, with the lack of lower shadows underscoring strong price momentum.
The insert on the graph shows the average monthly performances for the share since 2000. July stands out with an average monthly return of +3.3%, making it the best performing month on average. The consistently strong performance in July points to a relatively reliable seasonal trend, which in turn could attract more buyers, thus reinforcing the upward movement in the price.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R118, which classifies a profit target of R113 as realistic.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R101.
Share Information
| Share Code | VOD |
|---|---|
| Industry | Telecommunication Services |
| Market Capital (ZAR) | 200.16 billion |
| One Year Total Return | -12.88% |
| Return Year-to-Date | -6.55% |
| Current Price (ZAR) | 96.33 |
| 52 Week High (ZAR) | 120.60 |
| 52 Week Low (ZAR) | 85.44 |
| Financial Year End | March |
| The price is testing its 200-week simple moving average - a major psychological level. Several technical indicators further support a bullish trend. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 8.46 | 9.31 | 10.45 | 11.54 |
| Growth (%) | 10.06 | 12.25 | 10.41 | |
| Dividend Per Share (ZAR) | 6.35 | 6.63 | 7.41 | 8.20 |
| Growth (%) | 4.35 | 11.80 | 10.65 | |
| Forward PE (times) | 10.35 | 9.22 | 8.35 | |
| Forward Dividend Yield (%) | 6.88 | 7.69 | 8.51 | |
| Healthy double-digit growth is expected over the forecast horizon. The dividend yield remains attractive. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | INL - Take Profit (Close the Position) | DCP - Time exit (Close the Position) | OMU - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 120.71 | 32.49 | 11.99 |
| Current | 132.27 | 33.66 | 12.39 |
| Movement | 9.6% | 3.6% | 3.3% |
| We took an early profit on the share and may consider re-entering the position into weakness at a later stage. | The trade has reached our time exit date and we closed the trade. |
A price that is building a base remains of interest. Upside price momentum is supportive. Remains above its 200-day simple moving average.
Our profit target is at R11 with a trailing stop-loss at R11.55. Exit the trade on 16 September 2024 |
| Share Name and position | NRP - BUY (Continue to hold) |
|---|---|
| Entry | 131.00 |
| Current | 131.37 |
| Movement | 0.3% |
|
An inclining channel pattern remains of interest. Downside price momentum is a concern. Remains above its 200-day simple moving average.
Our take profit target remains at R146 with a trailing stop-loss level at R125.30. Exit the trade on 9 September 2024. |
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