Shoprite's combined subsidiaries constitute the largest fast-moving consumer goods (FMCG) retail operation on the African continent. The company is the market leader in both South African and African formal retail.
Geographically, the group enjoys a presence in several countries across Africa through its various brands including Shoprite, Checkers, Usave, OK, House & Home and Hungry Lion.
Technically, a price at major support makes the share attractive as an investment opportunity (see the black trendline on the main chart).
When the share price reaches a major support level, it suggests that the price has fallen to a level where significant buying interest is expected. Major support levels are usually where previous price declines have halted or reversed.
In addition, the share is also testing its 38.2% Fibonacci retracement level, derived from a series of numbers in which each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, etc). This level is considered significant as it often represents a shallow retracement in an uptrend.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R500. This classifies our profit target of R232 as realistic.
We suggest a low capital at-risk allocation to this trade.
Share Information
| Share code | SHP |
|---|---|
| Industry | Food & Staples Retailing |
| Market Capital (USD) | 119.31 billion |
| One year total return | -7.32% |
| Return year-to-date | -9.74% |
| Current price(USD) | 201.76 |
| 52 weeek high(USD) | 254.91 |
| 52 week low(USD) | 193.42 |
| Financial year end | July |
| Closing paragraph | The current share price makes for an attractive entry point. The price remains below its 200-day simple moving average. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 10.49 | 11.60 | 12.84 | 14.40 |
| Growth (%) | 10.49 | 10.71 | 12.21 | |
| Dividend Per Share (USD) | 6.00 | 6.65 | 7.48 | 8.42 |
| Growth (%) | 10.77 | 12.55 | 12.58 | |
| Forward PE (times) | 17.40 | 15.72 | 14.01 | |
| Forward Dividend Yield (%) | 3.29 | 3.71 | 4.17 | |
| Closing paragraph | Earnings growth is expected to remain solid over the forecast horizon. Dividend yield is also quite decent. | |||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position |
MSFT - Profit Take (Close the position) |
PEP - Buy (Close the position) |
MA - Buy (Continue to Hold) |
|---|---|---|---|
| Entry | 59.10 | 123.11 | 1003.84 |
| Current | 51.41 | 117.20 | 1147.16 |
| Movement | -13% | -4.8% | 14.3% |
| Summary text | The trade reached our stop-loss level, and we closed the position. Downside price momentum remains a significant concern. | The trade reached our stop-loss level, and we closed the position. |
The share is correcting from the lower range of the linear regression channel pattern. Still trading below its 200-day simple moving average but approaching it.
Our take profit target remains at R1 280, with a trailing stop-loss at R1037. Time exit: 18 September 2023. |
| Share Name and position |
KO - Buy (Continue to Hold) |
STZ - Buy (Continue to hold) |
ADBE - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 284.46 | 19.30 | 83.54 |
| Current | 309.11 | 20.40 | 87.27 |
| Movement | 8.7% | 5.7% | 4.5% |
| Summary text |
The share retraced from crucial support levels and crossed its 200-day simple moving average. Upside momentum supports the bullish trend.
Our take profit target remains at R328, with a trailing stop-loss at R290. Time exit: 22 May 2023. |
The price has shown signs of a potential upward trend, which is worth monitoring closely. Trading slightly above its 200-day simple moving average.
Our take profit target remains at R22.20, with a trailing stop-loss at R19.15. Time exit: 26 June 2023. |
The share is currently trading below its 200-day simple moving average, indicative of bearish sentiment. Declining downside price momentum raises doubt about the continuation of the downward trend.
Our take profit target remains at R132, with a trailing stop-loss at R68.80. Time exit: 8 July 2023. |
