Lib­erty Hold­ings: End­ing years of con­fine­ment

Finweek English Edition - - KILLER TRADE - BY MOXIMA GAMA

Af­ter the ef­fects of the global f i nan­cial cri­sis, Lib­erty Hold­ings Limited (Lib­erty) re­ported a sharp drop of about 90% in head­line earn­ings be­tween 2008 and 2009, blam­ing it on poor eq­uity hedg­ing de­ci­sions and Stan­lib, its as­set man­age­ment busi­ness, suf­fer­ing from a host of trou­bles at the time. Not for­get­ting that peo­ple were forced to scale back on a few ne­ces­si­ties, caus­ing the group to suf­fer a high level of pay­ment lapses, with most pol i c yhold­ers a g g r e s s i v e l y sur­ren­der­ing their poli­cies to make ends meet.

Nev­er­the­less, Lib­erty with­stood the bump, worked hard to sort out its trou­bles and has now em­barked on an ag­gres­sive sales ap­proach.

Lib­erty is South Africa’s fourth­largest in­surer by mar­ket value and is a hold­ing com­pany of var­i­ous op­er­at­ing sub­sidiaries en­gaged in the pro­vi­sion of f inan­cial ser­vices in­clud­ing long-term and short-term in­sur­ance, in­vest­ment, as­set man­age­ment and health ser­vices.

It op­er­ates in three busi­ness units: Re­tail SA; LibFin and In­sti­tu­tional and As­set Man­age­ment, which houses Stan­lib and Lib­erty Cor­po­rate; and the f inal unit is Lib­erty Prop­er­ties. The lat­ter over­sees Lib­erty Africa, Lib­erty Health and di­rect life in­surer Frank.net. Its pres­ence out­side of SA extends to 14 coun­tries in East, West and South­ern Africa. As of 5 Au­gust 2014, Lib­erty ac­quired the re­main­ing 25.1% stake in Lib­erty Health Hold­ings Limited.

Last week, Lib­erty re­ported a 3% drop in an­nual earn­ings, a piece of news that was re­ceived rather oddly by in­vestors, as the share price spiked up – trig­ger­ing a break­out out of a long-term con­sol­i­da­tion pat­tern, dated back to De­cem­ber 2012. Ac­cord­ing to the group, the earn­ings by LibFin In­vest­ments fell by 26%, and the as­set man­age­ment di­vi­sion, Stan­lib, con­tin­ued to suf­fer from the neg­a­tive sen­ti­ment caused by the fail­ure of African Bank, which saw net with­drawals of R13.7m from var­i­ous money-mar­ket funds. How­ever, their to­tal div­i­dend in­creased to 634c/ share from 58c in the pre­vi­ous year. The fact is that con­fi­dence in fi­nan­cial ser­vices has been some­what slug­gish. The level of com­pe­ti­tion in the lo­cal life in­sur­ance in­dus­try is also high, par­tic­u­larly at the up­per end of the mar­ket where Lib­erty’s tra­di­tional base lies and Dis­cov­ery has be­come a dis­rup­tive inf lu­ence. Nev­er­the­less, Lib­erty is con­stantly re­view­ing its cur­rent sit­u­a­tion, in an at­tempt to re­cover mar­ket share – by of­fer­ing more cre­ative prod­ucts launched un­der a life li­cence rather than un­der a unit trust li­cence.

The group is also ex­pand­ing into the rest of Africa, with a strat­egy of of­fer­ing dif­fer­ent prod­ucts from what its norm, like the real es­tate in­vest­ment trust launched for Kenya. Lib­erty is also hop­ing to ac­quire an in­surer and an as­set manager in Nige­ria in the near fu­ture. But the ques­tion is, should one trust the break­out on the monthly chart and buy or ac­quire more Lib­erty shares?

Lib­erty has traded through the up­per slope of a sym­met­ri­cal tri­an­gle, and a break­out from long-term con­fine­ment tends to be ag­gres­sive. But the monthly rel­a­tive strength in­dex (RSI) will be­come our lead­ing in­di­ca­tor. If the RSI es­capes its bear trend, by trad­ing above its re­sis­tance trend­line next month, gains to the17 620c/share will most likely be pos­si­ble in the short term (one to six months).

If the RSI re­tracts and pro­longs its bear trend, a false break through the up­per slope of the tri­an­gle would be con­firmed.

POS­SI­BLE SCE­NARIO:

AL­TER­NA­TIVE SCE­NARIO:

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.