By Peet Serfontein & Pritu Makan
We initiate a long position. Our upside target is set at R140 (reward/risk ratio: 2:6). We recommend a stop-loss at R113.
The SPAR Group acts as a wholesaler and distributor of goods and services to SPAR supermarkets, Build it building materials outlets, and TOPS at SPAR liquor stores. The company operates in sub-Saharan Africa, Ireland, and Switzerland. The group places strong emphasis on quality service, fresh produce, and customer satisfaction, making it one of South Africa's most trusted and recognisable supermarket brands.
The group has a decent track record of bedding down acquisitions over time and boasts defensive margins given its wholesaling model. SPAR's voluntary trading model is also the first-choice model for grocery retail entrepreneurs because of its flexibility and entrepreneurial freedom.
Technically, the price is at the lower range of the Bollinger Bands, which makes the share an appealing investment opportunity (refer to main chart). This situation typically signals a potential reversal within the recent downtrend as the share may be oversold or trading at the lower end of its recent volatility range.
The price is also trading around the 50% Fibonacci retracement level, which supports the bullish bias (see insert on the main chart). A retracement to the 50% level suggests that the share is undergoing a healthy correction rather than a trend reversal, allowing the market to consolidate gains before potentially resuming its upward movement.
The price remains below its 200-day simple moving average (SMA). As a result, the trade is seen as a counter-trend strategy, which aims to capitalise on the anticipated rebound.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R124.
| Share Information | |
|---|---|
| Share Code | SPP |
| Industry | Consumer Staples Distribution |
| Market Capital (ZAR) | 23.22 billion |
| One Year Total Return | 36.31% |
| Return Year-to-Date | -17.48% |
| Current Price (ZAR) | 120.55 |
| 52 Week High (ZAR) | 151.68 |
| 52 Week Low (ZAR) | 87.29 |
| Financial Year End | September |
| Several technical indicators are pointing to upside potential from current levels. Expect moderate volatility in the price going forward. | |
| Consensus Expectations (Bloomberg) |
||||
|---|---|---|---|---|
| FY24 | FY25E | FY26E | FY27E | |
| Headline Earnings per Share (ZAR) | 9.18 | 10.48 | 13.27 | 14.57 |
| Growth (%) | 14.26 | 26.62 | 9.78 | |
| Dividend Per Share (ZAR) | 0.00 | 1.16 | 6.82 | 8.12 |
| Growth (%) | - | 488.10 | 19.06 | |
| Forward PE (times) | 11.50 | 9.08 | 8.27 | |
| Forward Dividend Yield (%) | 0.96 | 5.66 | 6.74 | |
| Earnings growth expectations remain attractive over the medium term. | ||||
Buy/Sell Rationale:
Technical Analysis:
Long term Fundamental view
| Share Name and Position | VOD - BUY (Take profit) |
REM - BUY (Continue to hold) |
CML - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 109.87 | 145.56 | 37.75 |
| Current | 122.50 | 157.27 | 39.69 |
| Movement | +11.5% | +8% | +5.1% |
| The share is approaching our targeted time exit and we suggest closing the position. |
The price is developing a base, which remains of interest. Remains above its 200-day SMA. The start of upside momentum supports the trade strategy.
Our profit target is R164.00 with a trailing stop-loss at R150. Exit the trade around 2 June 2025. |
The price is at the pivotal point of remaining above both the 200-day and 200-week SMAs which remains of interest. Upside momentum supports the trade idea.
Our profit target is R42 with a trailing stop-loss at R38.00. Exit the trade around 19 May 2025. |
| Share Name and Position | TFG - BUY (Continue to hold) |
GRT - BUY (Continue to hold) |
JSE - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 127.93 | 13.22 | 130.10 |
| Current | 126.81 | 12.95 | 126.66 |
| Movement | -0.9% | -2% | -2.6% |
|
The price is developing a falling wedge pattern which remains of interest. Remains below its 200-day simple moving average and the trade idea is regarded as a counter-trend strategy. Fading downside momentum supports the trade.
Our profit target is R150, with a trailing stop-loss at R119. Exit the trade around 12 May 2025. |
The price is trading at one of the highest price bins in its price distribution which remains of interest. Remains just above its 200-day SMA. Upside momentum supports the trade strategy.
Our profit target is R16, with a trailing stop-loss at R12. Exit the trade around 17 November 2025. |
The price is in a trough, as per the Elliott Wave theory, which remains of interest. Remains above its 200-day SMA. Fading upside momentum is a concern.
Our profit target is R145 with a trailing stop-loss at R124.50. Exit the trade around 19 May 2025. |
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