Clicks Group is a health and beauty focused retail and supply group. Through market-leading retail brands, Clicks and The Body Shop, the group has hundreds of stores across southern Africa. 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.
Clicks is a defensive company, boasting solid growth prospects, high return of equity ratios, strong cash conversion and efficient execution. Therefore, the share continues to demand a valuation premium. Beauty and general front-store sales have proven more resilient than anticipated. UPD continues to win material new distribution contracts.
Technically, the price recently tested a crucial support level (see the black trend lines on the main chart as well as the insert) and remains above that point, reflective of strong buying pressure. This creates an attractive investment opportunity.
While Clicks is trading below its 200-day simple moving average of ~R279.50, we expect to see a rebound as the price develops further momentum.
Upside momentum according to the MACD indicator supports our bullish bias. This is further emphasised by the upwards movement of the OBV indicator, which suggests that money is flowing into the share.
Share Information
| Share code | CLS |
|---|---|
| Industry | Consumer Staples Distribution |
| Market capatalisation (ZAR) | 65.37 billion |
| One year total return | -11.76% |
| Return year-to-date | 0.91% |
| Current price(ZAR) | 267.95 |
| 52 weeek high(ZAR) | 319.94 |
| 52 week low(ZAR) | 244.61 |
| Financial year end | August |
| Closing paragraph | The share is trading well below its long-term average - we anticipate a rebound with moderate volatility going forward. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 10.80 | 10.31 | 11.57 | 12.95 |
| Growth (%) | -4.52 | 12.22 | 11.86 | |
| Dividend Per Share (ZAR) | 6.37 | 6.44 | 7.22 | 8.12 |
| Growth (%) | 1.02 | 12.15 | 12.48 | |
| Forward PE (times) | 25.98 | 23.15 | 20.70 | |
| Forward Dividend Yield (%) | 2.40 | 2.69 | 3.03 | |
| Closing paragraph | Growth is expected to recovery sharply in FY24 as the trading environment improves, with the group's continued store rollout programme offering further upside potential. The dividend yield remains attractive. | |||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position |
TFG - BUY (Continue to hold) |
AMS - BUY (Continue to hold) |
LHC - BUY (Continue to Hold) |
|---|---|---|---|
| Entry | 83.54 | 1003.84 | 19.30 |
| Current | 94.67 | 1083.23 | 20.74 |
| Movement | 13.3% | 7.9% | 7.5% |
| Summary text |
The share pulled back from the oversold scenario and remains below its 200-day simple moving average. Continued upside momentum supports our bullish bias.
Our profit target is R132, with a trailing stop-loss at R76.20. Time exit: 8 July 2024. |
Recently corrected from the lower range of the linear regression channel pattern. The price remains below its 200-day simple moving average. Fading downside momentum suggests there may be a bullish trend forming.
Take profit at R1 280. The trailing stop-loss is R973. Time exit: 18 September 2023. |
The price is worth monitoring as it shows signs of a potential uptrend. The share bounced up from a major support level and is trading above its 200-day simple moving average.
Take profit target set at R22.20, with a trailing stop-loss at R19.50. Time exit: 26 June 2023. |
| Share Name and position |
BAW - BUY (Continue to Hold) |
MNP - BUY (Continue to hold) |
VOD - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 85.56 | 284.46 | 123.11 |
| Current | 90.59 | 289.66 | 125.23 |
| Movement | 5.9% | 1.8% | 1.7% |
| Summary text |
The share price is testing its 200-day simple moving average. Upside momentum supports the predominant trend.
Our profit target remains at R104, with a trailing stop-loss at R83. Time exit: 3 July 2023. |
The share is trading close to its key support levels as well as its 200-day simple moving average. The bullish trend is reinforced by a decline in negative price momentum.
Take profit target set at R328, with a trailing stop-loss at R271. Time exit: 22 May 2023. |
The share price is forming a base and testing its 200-day simple moving average. Upside momentum supports the bullish trend.
Take profit target is R144, with a trailing stop-loss at R119.50. Time exit: 11 September 2023. |
