By Peet Serfontein & Jalpa Bhoolia.
OUTsurance Group is an investment holding company. It holds a diversified portfolio of strategic investments in some of South Africa's premier insurance and finance brands including a 90% stake in OUTsurance. In Australia, Youi provides car, home, business and compulsory third-party insurance. OUTsurance Ireland is due to launch this year.
Technically, a strong and consistent uptrend makes for an attractive investment opportunity (refer to the insert).
A consistent uptrend usually reflects strong company fundamentals or positive market sentiment about the sector and typically boosts investor confidence. This can, in turn, lead to increased buying activity and trigger a FOMO (Fear of Missing Out) response among investors. It may also appeal to more risk-averse investors due to lower levels of volatility.
Fading downside price momentum according the MACD (Moving Average Convergence Divergence) histogram supports the trade idea. As downward momentum slows, it signals a shift in market sentiment, and can result in increased buying activity, thus boosting the share price.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R53.00, which classifies our profit target of R50.00 as realistic.
We suggest a low to medium capital at-risk allocation to this trade. Increase exposure for a break above R44.
Share Information
| Share Code | OUT |
|---|---|
| Industry | Insurance |
| Market Capital (ZAR) | 64.51 billion |
| One Year Total Return | 24.00% |
| Return Year-to-Date | -0.31% |
| Current Price (ZAR) | 42.07 |
| 52 Week High (ZAR) | 46.00 |
| 52 Week Low (ZAR) | 30.69 |
| Financial Year End | June |
| Several technical indicators suggest further upside potential after strong gains over the last 12 months. Expect low to moderate volatility in the price. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 1.87 | 2.19 | 2.46 | 2.72 |
| Growth (%) | 17.58 | 12.22 | 10.44 | |
| Dividend Per Share (ZAR) | 1.43 | 1.55 | 1.80 | 1.90 |
| Growth (%) | 8.30 | 16.11 | 5.16 | |
| Forward PE (times) | 19.18 | 17.09 | 15.47 | |
| Forward Dividend Yield (%) | 3.69 | 4.28 | 4.50 | |
| Earnings growth is expected to be solid over FY24, before tapering off to the lower double-digits. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | APN - BUY (Continue to hold) |
MRP - BUY (Continue to hold) |
CFR - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 182.66 | 157.50 | 2 566.25 |
| Current | 200.76 | 172.54 | 2 800.00 |
| Movement | 9.9% | 9.5% | 9.1% |
|
A developing symmetrical triangle pattern remains of interest. Trading above its 200-day simple moving average. Fading upside momentum is concerning.
Our profit target is R222, with a trailing stop-loss at R176.60. Exit the trade on 27 December 2024. |
A price coinciding with a trough in the business cycle remains of interest. Upside price momentum is a highlight. Continues to stay above its 200-day simple moving average.
Our take profit target remains at R213 with a trailing stop-loss level at R150. Exit the trade on 17 April 2024. |
A distinct upward trend continues to hold our attention. Upside momentum is supportive. Crossed above its 200-day simple moving average.
Our recently revised profit target is R2 990.00, with a trailing stop-loss at R2 633.00. Exit the trade in on 6 May 2024. |
| Share Name and position | RDF - BUY (Continue to hold) |
NTC - BUY (Continue to hold) |
MTN - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 3.78 | 13.80 | 102.08 |
| Current | 3.98 | 14.55 | 104.34 |
| Movement | 5.3% | 2.5% | 2.2% |
|
A strategic investment opportunity. Continues to stay above its 200-day simple moving average.
Our take profit target remains at R4.50 with a trailing stop-loss level at R3.75. Exit the trade on 4 March 2024. |
A price break through key support and the formation of a potential stable base, is noteworthy. Upside price momentum has halted, which is a concern. Crossed above its 200-day simple moving average.
Our take profit target remains at R15.50 with a trailing stop-loss level at R13.50. Exit the trade on 5 February 2024. |
A potential mean reversion trade remains of interest. The share is below its 200-day simple moving average. Pause in upside price momentum is a concern.
Our take profit target remains at R122 with a trailing stop-loss level at R96.30. Exit the trade on 19 February 2024. |
