In this Issue:


Take profit on Telkom today!

Telkom released annual results last week and its share price soared after a brief pull back. It has rallied over 50% year to date.  Investors were expecting information on the potential property portfolio unlock. Nothing concrete has been delivered.

The CEO Sipho Maseko highlighted “Our strategy to separate our property and mast and tower portfolio to increase management focus and unlock value for the group is bearing fruit.” It’s difficult to quantify the potential value unlock, if there is even anything with net asset value per share of R57.85.

Normalised HEPS increased 22.6% to 722c, which was more than expected. Telkom mobile subscribers increased by 4.5 million to 9.7 million. And the average revenue per user was stable at R100. Subscriber growth of 85.9% in a saturated market is likely to never be repeated. While competition form new kids on the block like Rain will likely curb revenue per user growth due to their cheaper data costs and imminent roll out of 5G in major metros.

Telkom is trading on a PE of 15.18 at R94 per share. At this price the market is pricing in perfection and believe investors should bank profits.

Trader Tip: Traders looking to profit from a pull back, can short TKG with a stop loss above R100. And an interim target price of R82.00 and a longer-term target price of R70.00. Ratchet your stop loss lower to look in profits as the price falls.

Buy Discovery as it bounces from Support

Discovery’s share price has pulled back towards the strong support level in the mid R130. This level has seen buyers defend further declines and is a good entry level for short term traders and longer-term investors. Currently on a -1.6 standard deviation, the price of Discover is in oversold territory and ripe for a bounce.

Take a look at the chart below, you will see the first target level is just above R150, where the downward sloping resistance line meets the rally that faded in May. A break of this level, opens up the rally to the second target level just below R169.50.

Go long DSY below R140, with an initial target of R151.50.

Discovery - Oversold
Source: ProTrader

The week ahead:


Other Economic data releases of interest…