By Peet Serfontein & Zimele Mbanjwa
We initiate a long position with a target price of R399. We recommend a stop-loss at R331.
Clicks Group is a health and beauty-focused retail and supply group. Through its market-leading retail brands, Clicks, Sorbet, Claires and The Body Shop, the group has hundreds of stores across southern Africa, while 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.
With a strategic focus on expanding its footprint and growing its private label offering, Clicks has maintained a resilient performance amid economic headwinds, supported by strong cash generation and defensive demand for healthcare services. Further to this, Clicks is characterised by its strong growth, high return on equity (ROE), strong cash conversion and execution.
Technically, the price is in a steep downward trend, which makes the share an interesting candidate for a long position (see the insert on the main chart).
When prices fall too quickly, the stock tends to become oversold relative to its fundamental value or historical norms, often triggering technical buying or short covering. Additionally, steep declines frequently exhaust sellers, creating conditions for a reversal as bargain hunters step in. If such a move is followed by a stabilisation in price or a bullish candlestick formation, it may indicate that the worst of the selling pressure has passed—thus laying the groundwork for a recovery or a bounce from oversold levels.
The price has rebounded from the 50% Fibonacci retracement level, which also supports a bullish bias.
Fading downside price momentum, according to the Moving Average Convergence Divergence (MACD) histogram and the downward trajectory according to the on-balance volume (OBV) indicator, supports the bullish undertone for the share.
The price remains below its 200-day simple moving average (SMA) of R364, which may signal a period of consolidation or base-building, suggesting that selling pressure is easing and buyers are beginning to accumulate.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R360.
| Share Information | |
|---|---|
| Share Code | CLS |
| Industry | Food and Drug Retailers |
| Market Capital (ZAR) | 91.84 billion |
| One Year Total Return | 37.97% |
| Return Year-to-Date | 21.15% |
| Current Price (ZAR) | 385.77 |
| 52 Week High (ZAR) | 403.39 |
| 52 Week Low (ZAR) | 275.50 |
| Financial Year End | August |
| Despite recent weakness, the share has made solid progress year-to-date, with several technical indicators pointing to further upside potential. | |
| Consensus Expectations (Bloomberg) |
||||
|---|---|---|---|---|
| FY24 | FY25E | FY26E | FY27E | |
| Headline Earnings per Share (ZAR) | 11.94 | 13.54 | 15.47 | 17.49 |
| Growth (%) | 13.46 | 14.24 | 13.07 | |
| Dividend Per Share (ZAR) | 7.76 | 8.70 | 9.93 | 11.23 |
| Growth (%) | 12.10 | 14.20 | 13.08 | |
| Forward PE (times) | 26.61 | 23.29 | 20.60 | |
| Forward Dividend Yield (%) | 2.41 | 2.76 | 3.12 | |
| Earnings growth is expected to remain robust over the forecast term. | ||||
Buy/Sell Rationale:
Technical Analysis:
Long term Fundamental view
| Share Name and Position | VOD - BUY (Take profit) |
SHP - Stop Loss (Close the position) |
CML - Stop Loss (Close the position) |
|---|---|---|---|
| Entry | 109.87 | 292.78 | 37.75 |
| Current | 129.0 | 252.97 | 36.00 |
| Movement | +17.4% | -13.6% | -4.6% |
| The share reached our target price, so we took profit and closed the position. | The trade breached our stop loss level, and we've exited the trade. | The trade breached our stop loss level, and we've exited the trade |
| Share Name and Position | TFG - Stop Loss (Close the position) |
APN - Stop Loss (Close the position) |
JSE - Stop Loss (Close the position) |
|---|---|---|---|
| Entry | 127.93 | 171.38 | 130.10 |
| Current | 116.87 | 160.93 | 123.89 |
| Movement | -8.6% | -6.1% | -4.8% |
| The trade breached our stop loss level, and we've exited the trade. | The trade breached our stop loss level, and we've exited the trade. | The trade breached our stop loss level, and we've exited the trade. |
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