By Peet Serfontein & Hashmeel Suka
Shoprite Holdings is an investment holding company whose combined subsidiaries constitute the largest fast-moving consumer goods (FMCG) retail operation on the African continent.
The group holds a strong presence in South Africa and several other countries through various brands including Shoprite, Checkers, Usave, OK, House & Home and Hungry Lion.
Technically, the stock price has displayed relatively lower rolling volatility over the past two years (refer to the first chart), with recent price stability suggestive of improved sentiment among (primarily risk-averse) investors. This is a bullish indicator.
The stock is trading in the markup phase of the Wyckoff price cycle, characterised by growing market interest and hence strong buying pressure (volume). This supports our bullish stance.
Trade continues above both the 200-day and 200-week simple moving averages (SMAs), which act as significant support levels. This reinforces our view of a positive long-term trend.
Upside price momentum according to the MACD indicator, as well as upwards movement of the On-Balance Volume indicator, is also encouraging.
Share Information
| Share Code | SHP SJ |
|---|---|
| Industry | Food & Staples Retailing |
| Market Capital (ZAR) | 169.7 billion |
| One Year Total Return | 16.92% |
| Return Year-to-Date | 5.47% |
| Current Price (ZAR) | 287.02 |
| 52 Week High (ZAR) | 308.70 |
| 52 Week Low (ZAR) | 224.12 |
| Financial Year End | July |
| The share has been on a strong upward trajectory over the past year, with various technical indicators suggesting even further upside to come. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 11.54 | 12.73 | 13.96 | 15.91 |
| Growth (%) | 10.24 | 9.69 | 13.96 | |
| Dividend Per Share (ZAR) | 06.63 | 7.28 | 7.98 | 9.06 |
| Growth (%) | 9.85 | 9.56 | 13.56 | |
| Forward PE (times) | 20.28 | 18.10 | 18.04 | |
| Forward Dividend Yield (%) | 2.54 | 2.78 | 3.16 | |
| Bottom-line growth is expected to remain solid over the forecast horizon. | ||||
Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | ANH - BUY (Continue to hold) |
NRP - BUY (Continue to hold) |
DCP - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 1088.49 | 131.00 | 34.52 |
| Current | 1152.92 | 136.31 | 35.59 |
| Movement | 5.9% | 4.1% | 3.1% |
| A developing ascending triangle pattern remains of interest. Fading downside price momentum is supportive. Remains just below its 200-day simple moving average. Our take profit target remains at R1 235 with a trailing stop-loss level at R1 094. Exit the trade on 28 October 2024. | An inclining channel pattern remains of interest. Downside price momentum has halted which is encouraging. The stock remains above its 200-day simple moving average. Our profit target is R146 with a trailing stop-loss at R130.30. Exit the trade on 9 September 2024. | The stock continues to display higher highs and higher lows and remains above its 200-day simple moving average. Upside price momentum has halted, which is a concern. Our profit target is R39 with a trailing stop-loss at R33.75. Exit the trade on 29 September 2024. |
| Share Name and position | APN - BUY (Continue to hold) |
OMU - BUY (Continue to hold) |
EXX - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 241.01 | 11.99 | 194.83 |
| Current | 242.90 | 11.92 | 187.63 |
| Movement | 0.8% | -0.6% | -3.7% |
| A mature symmetrical triangle pattern is attractive. The stock remains above its 200-day simple moving average. Emerging downside price momentum raises some concern. Our profit target is at R268, with a trailing stop-loss at R230.50. Exit the trade on 16 December 2024. | A price building a base remains of interest. Fading upside price momentum raises some concern. The stock has dipped just below its 200-day simple moving average. Our profit target is at R14, with a trailing stop-loss at R11.15. Exit the trade on 16 September 2024. | A developing symmetrical triangle pattern remains of interest. The stock is testing its 200-day simple moving average. Fading upside price momentum is a concern. Our profit target is at R215, with a trailing stop-loss at R184. Exit the trade on 4 November 2024. |
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