House View: Coro­na­tion, PPC

Finweek English Edition - - News -

In­vestor con­cern might be one of the main rea­sons why Pre­to­ria Port­land Ce­ment Ltd’s (PPC’s) share price is cur­rently strug­gling to re­cover. The com­pany’s CEO, Jo­han Claassen, re­cently an­nounced his early re­tire­ment af­ter be­ing in the po­si­tion since July last year. This also means that the com­pany will have to find its fourth CEO in as many years. Claassen will stay on un­til a new CEO has been found.

The con­struc­tion in­dus­try has been un­der se­vere pres­sure in re­cent years, which has re­sulted in a grad­ual de­cline in de­mand for ce­ment. Com­bined with ris­ing op­er­a­tional costs – in­clud­ing from fuel price hikes – the com­pany has been op­er­at­ing in a very tough en­vi­ron­ment.

It still man­aged to grow rev­enue for the six months to 30 Septem­ber by 5%, to R5.6bn.

Re­leas­ing its re­sults on Sens, the com­pany said it ex­pected trad­ing con­di­tions to re­main dif­fi­cult, par­tic­u­larly in South Africa and the Demo­cratic Repub­lic of Congo. Ac­cord­ing to Claassen, per­for­mance in Zim­babwe is steadily re­cov­er­ing and out­put in Rwanda is im­prov­ing.

How to trade it:

PPC is trad­ing in the con­sol­i­da­tion phase of a huge bot­tom­ing-up pat­tern be­tween 1 020c/ share and 345c/share. Hav­ing pulled back within the side­ways pat­tern, PPC has re­tained sup­port at 510c – thereby form­ing a ris­ing bot­tom.

The cur­rent bear trend would only end above 700c/share (buy­ing level) – po­ten­tially trig­ger­ing grad­ual up­side to­wards 925c/share or 1 025c/share in the short to medium-term – where PPC may en­counter re­sis­tance. Re­frain from go­ing long if PPC should give in at 510c/share. It could then range be­tween 510c and 345c in this in­stance. ■ ed­i­to­[email protected]­

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