Dischem falls into buying territory ahead of results

Dischem falls into buying territory ahead of results

We bought into Dischem back in May at R30.50 and added to it in July at R28.00 banking us 12.5% when we closed it at our trailed stop loss. 

 

It has again fallen below R30.00 and support should build at R28.00 with any sell-offs below that level being short lived. 

 

Management provided an update to expected earnings for the FY2019 that will be a tailwind for the share price to move back above R30 and towards a target of R37.50.   

 

The interim results due next week Wednesday will provide a little more colour to the past 6 months to August. Analysts will be looking closely at the wholesale division which Management guided would be at break even at FY 2019. 

 

Management will have an opportunity to provide an update to the market, if they are on target we should see a strong bounce above R30.00 

 

Buy Dischem at R28.05 for a move above R30.00 in the short term. 

 

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Market at support and ripe for a rally 

 

The JSE is trading at a crucial support level after selling off over 7% from September’s high. Investors who have been looking for a good time to deploy cash should be allocating funds to their existing holdings, stocks like Naspers, Aspen, Remgro (if exposure is still reasonable). 

 

We’ve closed Discovery for a 6.6% gain and will be looking to re-enter at better levels. 

 

The week ahead: 

  • Local Data: Motor trade sales, Mining: Production and sales, Manufacturing: Production and sales. (11/10) 
  • Results Due ZED (09/10); NRL (10/10); ALP, CTK, EQU, KST, VUN (11/10); FGL, GLI (12/10) 
  • LDT (08/10): 4AASP, AVI, CSEW40, CTOP50, DIVTRX, MSP, PREFTX, PTXSPY, PTXTEN, SFNP, SVB  
  • Special Dividend: 4AASP, AVI 

 

Other Economic data releases of interest… 

 

  • Tuesday: RBA Rate Statement (AUS); Fed Chair Powell Speaks (USA) 
  • Wednesday: Services PMI (UK); ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Fed Chair Powell Speaks (USA) 
  • Thursday:  
  • Friday: Retail Sales (AUS); Unemployment Rate, Trade Balance (CAN); Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate (USA) 

 

Short Term Ideas 

  • Goldfields: Strong support at R34.00. Long below R35.25, hold for a move back above R40. Target it R43.75 with stop loss of R32.55. 

 

Long Term Ideas 

  • Lewis: Buy below R30, target R47.50. 
  • Remgro: Buy below R200, MEI recovery will support rise.  
  • Discovery: Position closed at R160 for a 6.67% gain.  
  • Coronation: Taking a leg lower. Buy below R60.00 for a move back to R80 
  • Shoprite: A break above R200 is needed to curb further declines. Hold. 
  • Aspen: Add below R165.00, keep exposure appropriate. 
  • Sygnia: Trading below R8. Add 
  • MTN: Average price R92.50. Resistance building at R90. Hold  
  • Glencore: Up 20.9%. Copper price rising strongly. Hold 
  • Naspers: Support building at R2,850. Buy below R2,900 

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