Trading Pepkor: Interim Results - Bull & Bear Factors
- Lester Davids
- May 27
- 4 min read
Research Notes For 26 to 30 May > https://www.unum.capital/post/r2630may
Trade Local & Global Financial Markets with Unum Capital.
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Analyst Disclosure: The following was summarized with an A.I tool.
Here are the bull and bear factors identified from the Pepkor interim results:
Bull Factors (Positive Indicators):
Strong Earnings Growth: 18.9% growth in normalised headline earnings per share.
Revenue Growth: +12.8% revenue growth to R48.8 billion.
Gross Profit Margin Expansion: +110 bps increase to 39.2%.
Operating Profit Growth: +13.3% growth to R5.8 billion.
HEPS Growth: +12.4% growth in HEPS to 84.3 cents.
Strong Cash Conversion: 82.3% cash conversion.
High Return on Net Assets: 23.7% return on net assets.
Market Share Gains: Strong trading momentum driving market share gains in retail.
Strong Performance in Key Brands: Stellar performance from PEP and recovery in Ackermans.
Healthy Fintech Growth: 34.5% increase in FinTech revenue, with significant growth in financial services.
Expansion into New Customer Segments: Acquisition of Choice Clothing to enter the semi-formal off-price segment.
Scaling the Home Lifestyle Business: Acquisition of Shoprite's furniture business.
Expanding Market Share in Adult Wear: Acquisition of Legit and other Retailability businesses, and the launch of Ayana.
Continued Trading Momentum: Trading momentum continued into the second half of the year.
Potential Benefit from Global Tariff Environment: South Africa potentially benefiting from increased global product supply capacity.
Disciplined Cost Management: Mentioned as a driver of strong results.
New Store Openings: Well on track to open 250-300 new stores in FY25.
Growth in Online Sales: Group online sales increased by 18%.
Growth in Informal Market: Flash business throughput increased by 23.6%.
Growth in Retail Credit: Credit sales increased by 29%.
Bear Factors (Potential Concerns):
Subdued and Highly Competitive Market: Despite strong results, the market is described as subdued and highly competitive.
Persistent Structural Challenges: High unemployment and low economic growth in South Africa.
Financially Constrained Consumers: Consumers remain financially constrained.
Slower NAV Growth: Net asset value per share growth is relatively low at 1.6%.
Weakness Outside Southern Africa (Rand Terms): Like-for-like sales outside southern Africa decreased by 11.0% in rand terms.
Challenging Environment in Brazil: High inflation and interest rates leading to customer indebtedness.
Muted South African Economic Landscape: Mentioned in the outlook as remaining challenging.
Previous Post (22 May)Trading Pepkor:
Pepkor's short-term momentum has waned, with the share price retreating against overhead resistance. The recent candle structure suggests short-term distribution. However, the long-term outlook remains supported as the share price is still trading above its rising 200-day simple moving average. In the short term, the price has lost it's 8-day EMA which is turning lower while the 21-day EMA has also started to flatten out. A retracement to the 50 to 61.8% Fibonacci level is not out of the question, which would be a potential re-accumulation range while on the sell side, the prior swing high (just above 3000c) would be a first (provisional) next-best level of selling interest. Note: Event Risk in the form of earnings on or around 27 May.
Previous Post (13 May): Pepkor's Power Move! Now Running +26%
The motivation behind the Tactical Trading Guide (price action model) was to systematically uncover opportunities and assess reward-to-risk, saving time in the process!
Here, clients have access to a process that has help to guide traders in order to generate cash and which has helped to manage risk.
PEPKOR is one of those names where the model stated: (1) "Aggressive selling recently, however the buy/long reward-to-risk may be attractive" and (2) "Has been sold aggressively. Look for a continued dip/decline before a minor rebound".
Scroll down to view the reading for the close of business on Friday 04 April.
On Monday 07 April, traders had the opportunity to accumulate, which was followed by a 26% rally (multi-week highs seen yesterday, Monday 12 May). The current price action model reading + the updated chart is as follows:
Previous Post (Saturday, 05 April): Price Action Commentary: Short & Medium Term
Click on the image to enlarge.
Readings as of the close of trade on Friday 04 April.
These are subject to change as the price action develops.
Short Term (approximately 1 to 10 days)
Medium Term (approximately 2 to 4 weeks)
Technology + Proprietary Insights has helped to develop automated tools and strategies that are used to identify potential trading opportunities as well as highlight potentially significant technical developments across various time frames. This page highlights readings from the analyst's Tactical Trading Guide (Price Action Tool). The tool provides automated price analysis of over 90 JSE-listed equities across 17 sectors and across 3 time frames: short (short term), medium (medium term) and long (long term). Readings are subject to change, based on the development of the subsequent price action.
SHOULD YOU URGENTLY REQUIRE A READING FOR THE LONG TERM, YOU ARE WELCOME TO E-MAIL ME AT LESTER@UNUM.CO.ZA
Lester Davids
Analyst: Unum Capital
(Data as of end of day Friday 28 March 2025)
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