Remgro Ltd (JSE: REM), a prominent South African investment holding company, has recently faced a significant shift in its share price fortunes, marking a stark departure from its previous trajectory. After three consecutive years of gains, the company’s market value has taken a substantial hit, plummeting by 25% year-to-date. This downward trend is underscored by four successive weeks of losses, highlighting the intensity of selling pressures in recent times.
Investors’ waning confidence in Remgro is evident in its share price performance, which reflects a notable downturn following the release of downbeat half-year results. The company’s headline earnings took a significant hit, declining by 40.1% from R3,529 million to R2,113 million, resulting in a corresponding decrease in headline earnings per share by 39.1% to R3.81. Additionally, the intrinsic net asset value per share, as of December 31, 2023, experienced a decline of 4.6% to R236.95.
Amidst these challenges, Remgro’s operational landscape is further complicated by various South African contextual factors, including power supply constraints, infrastructural breakdowns, high interest rates impacting consumer spending, and dwindling foreign investment confidence. Despite these headwinds, segments such as Financial Services, buoyed by positive earnings in OUTsurance Group, and Media, with satisfactory results from eMedia Investments, offer glimpses of resilience within the broader investment portfolio.
Technical
Remgro’s share price exhibits a clear downtrend, trading below its 100-day moving average, indicating sustained bearish momentum.
In early March, the share price aligned with its 100-day moving average before plummeting, establishing a resistance level at R152.06 per share. This resistance formed after six days of sideways consolidation within a rectangle pattern, where selling pressure intensified, culminating in a breakdown below the pattern.
Subsequently, the share price plunged to a two-and-a-half-year low but found support at the R117.25 per share level amid oversold RSI conditions, temporarily halting selling pressures. Currently, the share price has retraced slightly, approaching the 23.60% Fibonacci Retracement level. A breakout above this level could signal bullish momentum, potentially targeting the 38.20% level to the upside. Conversely, given the prevailing bearish sentiment, a retest of the R117.25 per share support level is probable.
Summary
In conclusion, Remgro faces a challenging landscape with a significant decline in market value, highlighted by four weeks of losses and a 25% year-to-date drop. Technical analysis shows a clear downtrend, with key levels at R152.06 resistance and R117.25 support amid prevailing bearish sentiment.
Sources: Remgro Ltd, Reuters, TradingView
Piece Written by Nkosilathi Dube, Trive Financial Market Analyst Invest
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