Not much has changed since our last Capitec research note except, the non-executive chairman stepped down, we had National Elections and the Capitec share price has moved lower than expected. Ok, so a lot has actually happened in the last month so let’s touch base with the banking disrupter.
The elections have come and gone, promises made on economic growth are starting to be set in motion for delivery. The banking system has come into focus with the continued Government bailouts of SOEs, especially Eskom. In doing so banks have increased their risk to their balance sheets even though recent lending was guaranteed by the state.
Source - Bloomberg
The financial sector has been humbled lately, but the major banks seem to be holding their own for now by looking at the banking index (above). The Banking Index has been trading in a steady uptrend since 2016 and might just test the support line (purple dotted) once more. If fundamental factors continue to weigh in on the economy and the Rand (ZAR) we might see more downside in this sector.
Capitec Bank Holdings Limited (CPI)
For those who bought the stock before the 16th of April would have received a nice dividend just as the non-executive chairman and founding CEO Riaan Stassen departed. Capitec has set the tone for disruption in the South African banking sector under Stassen so let’s see if it can continue. Capitec has one of the highest market valuations (on a price-to-book basis) in the world. This sounds great, but is not always a good thing as the bank might be perceived as overvalued by investors.
The price action has moved lower as expected from the advanced move higher (uptrend 2) and is finding support at uptrend 1 (the mean). We might see the price move higher from here, but the chance remains that we might find a better entry point lower at the 123000 cents per share.
Source - Bloomberg
- Portfolio Neutral (Current).
- Portfolio Buy opportunity on the side-line for now (Current).
- #WhatsTheBeef Long term Target price: will wait for possible correction (Future)
Know your company: Capitec (CPI)
- Capitec was founded by Riaan Stassen, Michiel Le Roux and Jannie Mouton who also founded the PSG Group.
- The bank was founded in 2001 and listed on the JSE on the 11th of February 2002.
- Capitec has over 10 million active clients and growing.
Follow Barry Dumas
Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.