Omnia has surged over the years from levels around 3 700c/share to the current levels around 22 800c/ share, which means that those investors who bought the stock in 2009 have happily gained more than a 500% return. Omnia Holdings is a holding company for a group of companies that produce and supply fertiliser to the agricultural industry, explosives to the mining industry and industrial chemical products.
Once a little mouse in a very big field, Omnia now competes with big giants like Sasol and AECI, even outperforming its closest competitor, AECI, by a wide margin over the past five years. Its expansion strategy amplified into the rest of Africa when issues arose in the South African underground mining market. The company continued to enhance its supply chains to African markets, which have a large exposure to opencast mining. Omnia serves the mining industry through its subsidiaries BME Mining and Protea Mining Chemicals, which produce electronic detonators and blended bulk explosives formulations for the opencast mining industry and packaged explosives for underground mining.
Not forgetting to mention its impressive earnings over the past couple of years; profits for the year ended June 2013 hit record highs of R880m (up by 40%), the operating margin rose from 8.1% to 9.1%, EPS was up by 40% to 1 332c/share and the total dividend for the year was up 50% to 420c/ share. A final dividend of 270c/share was declared within that year. But although Omnia is an extremely attractive share based on all these facts, I would not invest in it at current levels. POSSIBLE SCENARIO: Omnia is encountering strong resistance at 23 750c/ share, and note that its relative strength index (RSI) has been negatively diverging since May 2013, which means investors have been gradually selling on every uptick to reduce their exposure and protect themselves from an aggressive selloff. Also, Omnia is trading well within the third and final phase of its primary bull trend and the monthly RSI is com- ing off an overbought position. Failure to trade above 23 750c/share, together with the bearish RSI spells caution. Downside below 22 325c/share would be a sign to reduce long positions, and then sell below 20 250c/share. Breaching that support level would mark the end of the third phase and Omnia could gradually correct to either the 16 315c/share or 13 995c/ share support level. ALTERNATIVE SCENARIO: Omnia could surge further through the 23 750c/ share all-time high, but that would increase the chances of an even steeper and more rapid pull-back when buyers run out of steam.