Clicks Group is a health and beauty focused retail and supply group. The group has hundreds of stores across southern Africa through its market-leading retail brands, Clicks and The Body Shop. United Pharmaceutical Distributors (UPD) provides distribution capability for the group's healthcare strategy and has close to a third of market share in private pharmaceutical wholesale in South Africa.
Clicks is a defensive company and is characterised by growth, high return on equity (ROE), strong cash conversion and execution.
Technically, the share price is displaying a confluence of both the 200-day and the 200-week simple moving averages, with a bias toward the upside (refer to the first chart). This is a strong indicator of the price trend and suggests that bullish sentiment will improve significantly.
The share is trading above the 200-day simple moving average (SMA) of ~R262. A further uptick in the price will confirm the strong bullish trend.
Fading downside price momentum according to the MACD indicator, and sidewards movement of the On-Balance Volume indicator (which suggests money is flowing into the share) support our bullish stance.
The share is also testing its 61.8% Fibonacci retracement level, which is another positive sign.
Share Information
| Share Code | CLS |
|---|---|
| Industry | Food and Drug Retailers |
| Market Capital (ZAR) | 65.13 billion |
| One Year Total Return | -12.38% |
| Return Year-to-Date | 3.05% |
| Current Price (ZAR) | 271.71 |
| 52 Week High (ZAR) | 318.44 |
| 52 Week Low (ZAR) | 232.63 |
| Financial Year End | August |
| Closing paragraph | The share price has come under a bit of pressure since last year, but various technical indicators suggest a strong improvement going forward. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 10.45 | 11.69 | 12.97 | 14.23 |
| Growth (%) | 11.82 | 11.01 | 9.67 | |
| Dividend Per Share (ZAR) | 6.79 | 7.55 | 8.36 | 9.22 |
| Growth (%) | 11.13 | 10.77 | 10.28 | |
| Forward PE (times) | 22.90 | 20.61 | 19.14 | |
| Forward Dividend Yield (%) | 2.83 | 3.13 | 3.39 | |
| Closing paragraph | Earnings growth is expected to remain robust over the medium term. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | BVT - Stop Loss (Close the Position) |
INL - Time Exit (Close the Position) |
DCP - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 272.78 | 105.00 | 24.12 |
| Current | 257.77 | 99.63 | 23.78 |
| Movement | -5.5% | -5.1% | -1.4% |
| Summary text | The share price breached our stop-loss level, and thus we closed the position. | Weakening technicals indicate limited support for a recovery in the share price. Given that we have reached our intended time-exit, we suggest closing the position. |
The share continues to display signs of bullish divergence. The price remains below its 200-day simple moving average, and we maintain the counter-trend strategy. The price action also seems to be building a base.
Our profit target is R29, with a trailing stop-loss at R22. Close the position around 29 December 2023. |
| Share Name and position | STXRES - Buy (Continue to hold) |
ANG - Buy (Continue to hold) |
APN - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 59.63 | 369.83 | 182.66 |
| Current | 57.95 | 357.04 | 167.02 |
| Movement | -2.8% | -3.5% | -8.6% |
| Summary text |
The ETF is trading at major support in an accumulation phase and remains below the 200-day simple moving average. Upside price momentum is fading and is a concern.
Our profit target is R69, with a trailing stop-loss at R56. Exit the trade around 8 January 2024. |
Price action is at the early stage of a change in trend, and this remains of interest. The share remains below the 200-day simple moving average. Upside momentum has halted.
Our profit target is R459, with a trailing stop-loss at R342. Exit the trade around 22 January 2023. |
The formation of a symmetrical triangle pattern in the share price remains attractive. The share, however, is trading below its 200-day simple moving average, with downside price momentum still a concern.
Our profit target is R222, with a trailing stop-loss at R160. Exit the trade around 27 December 2023. |
