By Peet Serfontein & Khumbulani Kunene
Investec is an international specialist bank that provides a range of financial products and services to a niche client base in its core geographies, the United Kingdom (UK) and South Africa. The company is dual-listed on the Johannesburg Stock Exchange and the London Stock Exchange.
Investec trades at a substantial discount to its peers even when accounting for the UK business.
Technically, historical seasonal strength from October to January makes the stock an attractive investment opportunity (see the insert on the main chart).
This pattern illustrates strong positive performances in October, November, December, and January, ranging from +3.3% to +3.9%. October marks the beginning of the fourth quarter and is often characterised by renewed optimism as companies start reporting strong earnings for the year. November and December may coincide with a "Santa Claus rally", whereby the holiday season and increased consumer spending contribute to heightened investor confidence.
January typically sees continued momentum and is often referred to as the "January Effect" - equity prices tend to rise due to increased buying activity and new year optimism. The +3.1% return in January highlights this trend, signalling a potential continuation of the bullish momentum from prior months.
The price in the Markup phase of the Wyckoff Price Cycle supports a bullish stance. This phase follows an Accumulation phase, where smart money accumulates assets at lower prices, setting the stage for a price breakout.
The Relative Strength Index (RSI) highlights that the stock will be overbought at ~R160, making our profit target of R155 realistic.
We suggest a medium capital at-risk allocation to this trade.
Share Information
| Share Code | INL |
|---|---|
| Industry | Financial Services |
| Market Capital (ZAR) | 128.92 billion |
| One Year Total Return | 41.68% |
| Return Year-to-Date | 12.53% |
| Current Price (ZAR) | 136.77 |
| 52 Week High (ZAR) | 144.02 |
| 52 Week Low (ZAR) | 98.21 |
| Financial Year End | March |
| The price has made good progress over the past year and seems to be recovering well from a dip in September. The share is trading above its 200-day simple moving average (SMA). | |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (GBP) | 0.75 | 0.79 | 0.84 | 0.93 |
| Growth (%) | 4.81% | 7.52% | 9.72% | |
| Dividend Per Share (GBP) | 0.35 | 0.37 | 0.40 | 0.43 |
| Growth (%) | 7.83% | 7.53% | 7.53% | |
| Forward PE (times) | 7.61 | 7.08 | 6.45 | |
| Forward Dividend Yield (%) | 6.23 | 6.69 | 7.25 | |
| Sustained earnings growth over the medium term is expected. The dividend yield is attractive. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | QLT - Buy (Continue to hold) |
WHL - BUY (Continue to hold) |
TBS - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 31.11 | 60.82 | 224.91 |
| Current | 33.83 | 65.71 | 241.93 |
| Movement | +8.7% | +8.0% | +7.6% |
|
The price appears to be developing the 5th wave of the Elliott Wave Price analysis. Upside momentum supports the strategy. Remains above its 200-day simple moving average.
Our profit target is at R35 with a trailing stop-loss at R32.40. Exit the trade on 2 December 2024. |
A price building a base remains of interest. Fading upside price momentum is concerning. Remains above its 200-day simple moving average.
Our profit target is at R71 with a trailing stop-loss at R61.50. Exit the trade on 25 November 2024. |
A price at major resistance remains of interest. Fading upside momentum is a concern. Remains above its 200-day simple moving average.
Our profit target is at R260 with a trailing stop-loss at R217.10. Exit the trade on 28 April 2025. |
| Share Name and Position | OMU - BUY (Continue to hold) |
N91 - BUY (Continue to hold) |
ANH - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 12.48 | 40.62 | 1 153.11 |
| Current | 12.91 | 41.61 | 1 156.81 |
| Movement | +3.4% | +2.4% | +0.3% |
|
A price building a base remains of interest. Fading upside price momentum is concerning. Remains above its 200-day simple moving average.
Our take profit target remains at R14.40 with a trailing stop-loss level at R12.80. Exit the trade on 17 December 2024. |
A price that appears to be forming a base remains of interest. Upside price momentum halted, which is concerning. Remains just above its 200-day simple moving average.
Our profit target remains at R45 with a trailing stop-loss at R39.75. Exit the trade on 9 December 2024. |
A developing ascending triangle pattern remains of interest. Upside price momentum has regained some strength, supporting the trade. Testing its 200-day simple moving average.
Our profit target is at R1 289 with a trailing stop-loss at R1 102. Exit the trade on 20 January 2025. |
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