Finweek English Edition - October 24, 2019

PICK N PAY STORES

By Moxima Gama

marketplace killer trade

PICK N PAY STORES

PSG

PSG GROUP

52-week range: R194.24 - R276.

Price/earnings ratio: 21.

1-year total return: 13.73%

Market capitalisation: R55.22bn

Earnings per share: R10.

Dividend yield: 2.03%

Average volume over 30 days: 673 584

SOURCE: IRESS

52-week range: R54.48 - R79.

Price/earnings ratio: 17.

1-year total return: -3.86%

Market capitalisation: R29.35bn

Earnings per share: R3.

Dividend yield: 3.89%

Average volume over 30 days: 1 284 445

SOURCE: IRESS

i

nvestment holding company

PSG Group operates across

a range of industries, such as

financial services, banking,

private equity, agriculture and

education. Its five biggest hold-

ings are Capitec, PSG Konsult,

Curro, Zeder and PSG Private

Equity.

By 2016, PSG had grown

at an extraordinary compound

annual growth rate – including

dividends reinvested – of 50%

per annum. In December 2017,

PSG reached an all-time high

at 29 730c/share. However, its

share price was also hit by short-

seller Viceroy’s report on Capitec

early last year. Although the

report did not comment on PSG’s

business model, its group share

price plummeted by almost 45%.

Outlook: PSG’s share price

attempted to regain its losses

after the dust from the Capitec

rumours settled. However, the

lower peak formed at 27 690c/

share indicated a change in

investor sentiment, which has

resulted in the current downside

in the share price. This is despite

Capitec testing new highs. In

mid-October, PSG reported

an increase of 12% in headline

earnings per share (HEPS) for the

six months to the end of August.

The dividend per share increased

by 8% to R1.64.

On the charts: PSG has retraced

through the second support

trendline of its primary bull trend

and is holding support at

19 485c/share. Because PSG is

largely invested in SA companies,

it is exposed to challenges in the

general economic and political

environment.

Go short: PSG has formed a

lower top at 27 690c/share. It’s

currently recovering and could

aim to retest resistance at

24 960c/share. However, another

falling top would form upon

failure to trade through that

level – potentially signalling that

support at 19 485c/share could

give in. If so, PSG’s share price

could correct further to either

the 16 460c/share support level

or the major support trendline of

its primary bull trend (black bold

trendline).

Go long: Upside through 24 960c/

share would mean investor

sentiment is warming up. But

PSG would have to trade above

27 690c/share to negate the

falling tops. If so, PSG could

retest its all-time high at

29 730c/share. Defying that

resistance level could see PSG

commence a new bull phase

targeting 40 000c/share in the

medium term. ■

[email protected]

Moxima Gama has been rated as one of the

top five technical analysts in South Africa.

She has been a technical analyst for 10 years,

working for BJM, Noah Financial Innovation

and for Standard Bank as part of the research

team in the Treasury division of CIB.

f

rom 2002 lows at 890c/share,

Pick n Pay Stores tested an

all-time high at 8 425c/share in

August 2016, as its turnaround

strategy, set in motion following the

appointment of Richard Brasher in

2013, started paying off.

Outlook: Despite accelerating its

efforts to improve efficiency in 2018,

the trading environment for

Pick n Pay and other retailers in

South Africa has been tough and

the competition offering lower prices

to attract customers has been rife.

Investors are currently displaying

subdued sentiment as Pick n Pay’s

share price continues to consolidate

within its primary bull trend, but with

a bearish bias.

Pick n Pay’s results were due on

22 October, after this edition of

finweek went to print.

On the charts: Pick n Pay has

breached the lower slope of its

consolidating triangle formed

within its primary bull trend.

Go short: Although Pick n Pay

has regained upside it would have

to trade above 7 000c/share to

resume its triangle and possibly

recover its losses toward the

all-time high at 8 425c. Failure to

trade above 7 000c would suggest

that the current recovery was a

mere return move, and downside

could extend to either the major

support trendline (black bold

trendline dated back to 2002) or

the 4 850c/share support level –

where it should hold.

Go long: Pick n Pay would have

to trade above 8 425c/share to

commence a new bull phase to the

12 435c/share long-to-medium-

term targeted mark. ■

SOURCE: MetaStock Pro (Reuters)

SOURCE: MetaStock Pro (Reuters)

Falling top forming?

Real or false recovery?

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