Buy Firstrand before it Rallies 9.2%

On Friday Firstrand (JSE: FSR) released a positive trading update indicating earnings will be up over 22% on the back of its final payment for the Discover Card transaction. This R2.3 billion is a welcomed boost for FSR as its operational earnings growth has matured and grows steadily in the high single digits.  

Having been awarded the “Most Innovative African Bank”in 2017 and the “Best Digital Bank in SA”in 2018, FSR is the on Big Four bank that can withstand the disruption heading into the SA Banking space from the new “Virtual” Banks that are popping up. 

On a forward PE of 12.8, it’s not cheap relative to its historical average but the price has remained steady above R60. And investors are rewarded for holding the stock as it trades on a dividend yield over 4%. 

FSR is our preferred bank in the sector and the one bank with foresight to change its model to remain competitive through the fourth industrial revolution. 

Buy Firstrand (JSE:FSR) below R65 for a move to R71 in the coming weeks. Long term target to be updated upon results release. 

The week ahead: 

  • Local Data: Producer Price Index (28/02); 
  • Results Due: ALH, ASR, CSB, JSC, SHP, WBO (26/02); AVL, CCO, GSH, NRP, TOR (27/02); BLU, CLI, IPL, IMP, MSM, MND, MNP, SNT, SUR, SNH (28/02); ANH, ARI, ASC, FVT, NED, SBV (01/03) 
  • LDT (26/02): ASHWGB, ASHGEQ, HDC 
  • Special/Share Premium Dividend: NEWGBP, NEWUSD (26/02) 

 

Other Economic data releases of interest… 

  • Tuesday: Inflation Report Hearings (UK); Fed Chair Powell Testifies, CB Consumer Confidence (UK) 
  • Wednesday: CPI (CAN); Fed Chair Powell Testifies (USA) 
  • Thursday: Advance GDP (USA); ANZ Business Confidence (NZL); Private Capital Expenditure (AUS) 
  • Friday: Fed Chair Powell Speaks, ISM Manufacturing PMI (USA); GDP (CAN) 

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