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FirstRand stock analysis: the race for digital dominance

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FirstRand Limited (FSR)

Who would have thought banking can be made fun? The race is on for digital dominance in the local banking sector with SA’s most valuable bank by market cap still ahead of the rest. FirstRand‘s most successful brand FNB has made “FinTech” and Digital Banking the new norm.

Fundamentals

Despite a very challenging economical land scape, FirstRand still managed to deliver great results over the year ending June 2019. The latest earnings released showed that headline earnings increased by 5% keeping pace with inflation. Income before tax was up 8% with profit for the year also increasing with 5% to R29.44 billion.

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FirstRand Limited

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FNB is still the biggest driver of revenue for the group with higher volumes reported through its digital and electronic channels. WesBank and Rand Merchant Bank (RMB) both declined in growth from the previous reporting period.

The group also pay a final dividend of R1.52 per share bringing the total dividend for the year to R2.91. The stock is going Ex-Dividend on the 24th of September 2019 and the dividend payment date is scheduled for the 25th of September 2019.

First Rand share overview:

  • Market Cap of R354 Billion
  • Dividend Yield: 4.72%
  • Shares in issue: 5,609,162,099
  • PE Ratio: 11.4
  • 52 Week Range low of 5486c and 7179 cents per share high

Outlook

The group expects that the domestic economy will remain under pressure for some time to come with low income growth and weaker domestic demand being some of the main driving factors. However, the group expects the momentum from FNB to continue on the back of customer and volume growth. RMB is expected to remain resilient with WestBank’s performance subdued due to factors like expected lower vehicle sales over the coming period.

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FirstRand Limited

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Chart Life

By looking at the price action we can see the rebound in the share price, mainly due to the strengthening South African Rand and better than expected earnings. We would need to see the price action hold momentum and close above the 6418c per share resistance level. A close below the 6161c per share support would negate the uptrend.

The Relative Strength Index (RSI) technical indicator is also reaching over bought levels which might indicate the new trend is nearing its end.

FirstRand-EasyEquities-chart
Source - Bloomberg

Portfolio particulars:

  • Portfolio Neutral (Current)*
  • Portfolio Buy opportunity: close above R64.18 per share**
  • #WhatsTheBeef long term target price: R69.37 per share

Know your company: FirstRand Limited (FSR)

  • FirstRand Limited, also referred to as FirstRand Group is the holding company of FirstRand Bank. The group has its headquarters in Johannesburg, South Africa.
  • FirstRand is one of the five largest banking groups in South Africa and sub-Saharan Africa.
  • FirstRand Bank has three major divisions which are separately branded namely:
    • First National Bank – FNB is the retail and commercial bank division of FirstRand Bank.
    • Rand Merchant Bank – RMB is the corporate and investment division of FirstRand Bank.
    • WesBank – Is the installment finance division of FirstRand Bank. WesBank is South Africa's largest provider of loans for cars.



*Portfolio Hold (Current) refers to investors who already hold the stock within their portfolio.

**Portfolio Buy opportunity refers to Technical level crossed which might imply that the markets behaviour would support the outlook and Close above refers to a share price close above a Technical Resistance level.

 

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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

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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) and GT247.com do not warrant the correctness, accuracy, timeliness, reliability or completeness of any information received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities and GT247.com (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.