Nam­pak sticks out like a sore thumb

In­vestors have ap­par­ently used the ear­lier weak­ness on the JSE as a buy­ing op­por­tu­nity. To sup­port this, the share prices of most of the 100 largest com­pa­nies on the ex­change are now once again ly­ing above their 200-day ex­po­nen­tial mov­ing av­er­ages.

Finweek English Edition - - MARKETPLACE TECHNICAL STUDY - Ed­i­to­rial@fin­week.co.za

most of the top 100 com­pa­nies on the JSE are once again ly­ing above their 200-day ex­po­nen­tial mov­ing av­er­ages (EMAs) af­ter most of them – 54% – found them­selves be­low their EMAs last month for the first time in quite some time ( fin­week, 15 Oc­to­ber). Some 55% of the top 100 are once again in pos­i­tive ter­ri­tory, which in­di­cates that in­vestors used the mar­ket’s pull­back to buy more shares.

Of the strong­est shares, PSG Group is head and shoul­ders above the rest, fol­lowed by its off­shoot, Capitec, de­spite an­a­lysts’ fears re­gard­ing the un­usual phe­nom­e­non that it’s trad­ing at a sub­stan­tial premium to the val­u­a­tion of its un­der­ly­ing in­vest­ments.

Cor­po­rate ac­tion is the rea­son why SABMiller and Aquarius fill the third and fourth places re­spec­tively. An in­ter­est­ing fact, ev­i­dent from the ta­ble of the strong­est shares, is that the long­stand­ing stepchild among the ma­jor shares, Sappi, is still ex­pe­ri­enc­ing firm buy­ing pres­sure; to such an ex­tent that not only did it reach a new high, but in fact its high­est level since 2009. There’s much truth in the be­lief that once a heavy­weight has started reach­ing new highs, it will con­tinue do­ing so be­cause large in­vestors have de­cided on a rerat­ing.

Among the weak­est shares, com­mod­ity stocks are still suf­fer­ing the most. Lon­min, Kumba and ArcelorMit­tal are all three ly­ing 50% or more be­low their EMAs. In fact, with one ex­cep­tion, the 12 weak­est of the weak were resources shares. The ex­cep­tion, which sticks out like a sore thumb, is Nam­pak, Africa’s largest di­ver­si­fied pack­ag­ing group, which is be­ing heav­ily pun­ished be­cause of its dis­ap­point­ing re­sults for the six months to March. It’s at lev­els last seen in 2012 and judg­ing by the con­sis­tently new lows reached, large in­vestors did not hold out much hope that mat­ters would im­prove in the half-year to end Septem­ber. Nam­pak is fac­ing a num­ber of ma­jor prob­lems, such as its glass divi­sion, which suf­fered a loss of R70m. And then there is talk of a price war with Con­sol, the coun­try’s largest sup­plier of glass­ware. A pos­i­tive is that the rest of Africa’s con­tri­bu­tion to Nam­pak’s prof­its is grow­ing well. In the half-year to March, it con­trib­uted 38% (2014 hal­fyear: 27%) to trad­ing profit.

An­other share that has been heav­ily pun­ished –land­ing up among the resources and build­ing and con­struc­tion stepchil­dren – is MTN. It finds it­self in this po­si­tion be­cause of the enor­mous fine it has to pay in Nige­ria, while the mar­ket is also averse to the fact that the JSE wants to in­ves­ti­gate it.

Among the shares that have bro­ken out and ap­pear in­ter­est­ing, Ad­cock In­gram, Vuk­ile and Re­bo­sis seem to be the most promis­ing.

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