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 services more than 13 600 stores in over 48 countries on four continents.
The group has a decent track record of bedding down acquisitions over time and boasts defensive margins given its wholesaling model. We think the company could see a recovery of volumes/pricing off a low base with a turnaround in Poland also possibly providing support in the medium term. SPAR's voluntary trading model is the first-choice model for grocery retail entrepreneurs because of its flexibility and entrepreneurial freedom.
Technically, a price that progressed to the ”leading” quadrant of the Relative Rotational Graph (RRG) makes the share attractive as an investment opportunity (see the lower panel).
The RRG chart is used to analyse the relative strength and momentum of shares. The chart consists of four quadrants representing different stages of the share price movement: Leading, Weakening, Lagging, and Improving.
When a share moves from the Improving quadrant to the Leading quadrant on the RRG chart, it indicates a significant improvement in the share's relative strength and momentum.
According to the RSI (Relative Strength Index), the stock will be overbought at R200. This classifies our profit target of R154 as realistic.
We suggest a low capital at risk allocation to this trade.
Share Information
| Share code | SPP |
|---|---|
| Industry | Food Retailing |
| Market Capital (USD) | 24.95 billion |
| One year total return | -11.70% |
| Return year-to-date | 14.11% |
| Current price(USD) | 129.52 |
| 52 weeek high(USD) | 166.51 |
| 52 week low(USD) | 112.98 |
| Financial year end | September |
| Closing paragraph | The share has picked up good momentum year-to-date and remains below its 200-day simple moving average of ~R140. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 11.59 | 12.63 | 14.16 | 15.63 |
| Growth (%) | -1.26 | 8.98 | 12.07 | 10.39 |
| Dividend Per Share (USD) | 7.11 | 4.40 | 9.31 | 10.72 |
| Growth (%) | -38.17 | 111.74 | 15.13 | |
| Forward PE (times) | 10.25 | 9.15 | 8.29 | |
| Forward Dividend Yield (%) | 3.39 | 7.19 | 8.27 | |
| Closing paragraph | Earnings growth for FY22 was muted but is expected to rebound in FY23. The dividend yield is also expected to improve. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term Fundamental view:
| Share Name and position |
TFG - Buy (Continue to hold) |
LHC - Buy (Continue to hold) |
SHP - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 83.54 | 19.30 | 202.97 |
| Current | 85.57 | 19.41 | 201.78 |
| Movement | 2.4% | 0.6% | -0.6% |
| Summary text |
The share is currently trading below its 200-day simple moving average, indicative of a bearish sentiment. However, fading downside price momentum is supportive. Bullish divergence also remains notable.
Our take profit target remains at R132, with a trailing stop-loss at R67. Time exit: 8 July 2023. |
The price has shown signs of a potential upward trend, which is worth monitoring closely. Trading above its 200-day simple moving average. However, diminishing upside price momentum raises concerns over the bullish trend.
Our take profit target remains at R22.20, with a trailing stop-loss at R18.15. Time exit: 26 June 2023. |
The price at a significant support level remains of interest. The share is currently trading below its 200-day simple moving average. Downside price momentum halted.
Our take profit target remains at R232, with a trailing stop-loss at R192. Time exit: 3 July 2023. |
| Share Name and position |
PRX - Buy (Continue to hold) |
BAW - Buy (Continue to hold) |
INL - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 1387.97 | 85.56 | 105.00 |
| Current | 1356.90 | 83.60 | 102.41 |
| Movement | -2.2% | -2.3% | -2.5% |
| Summary text |
The share continues to hold above crucial support. Trading above its 200-day simple moving average.
Our take profit target remains at R1606, with a trailing stop-loss at R1295. Time exit: 15 August 2023. |
The share is trading below its 200-day simple moving average and is currently testing its 78.6% Fibonacci retracement level.
Our take profit target remains at R104, with a trailing stop-loss at R78. Time exit: 3 July 2023. |
Appears to be starting with wave 5 out of the Elliott wave analysis and remains of interest. The share remains above its 200-day simple moving average. Fading downside price momentum supports the bullish trend.
Our take profit target remains at R121, with a trailing stop-loss at R99. Time exit: 7 August 2023. |
