Pepkor Holdings (JSE: PPH) has endured a challenging week, with its share price slumping over 5.38%. This downtrend extends a year-to-date decline of more than 12% despite remaining flat over the past 52 weeks. The recent weakness can be attributed to the sale of Pepkor’s subsidiary, The Building Company (TBCo), for R1.2 billion. While analysts believe Pepkor secured a good price, the overall sentiment suggests a strategic shift away from the DIY and timber retail space.
Looking ahead, Pepkor intends to use the net proceeds from the TBCo sale to reduce debt. This strategy aligns with the company’s goal of maintaining a flexible capital structure and funding future growth initiatives. Additionally, Pepkor’s recent secondary listing on the A2X Markets alongside other prominent retailers like Shoprite and Woolworths could enhance its investor reach and potentially improve liquidity.
Technical Analysis
Pepkor’s daily chart technical outlook paints a mixed picture. The share price is currently trading relatively flat, attempting to find support after a recent bearish move. The price action decisively broke below all three key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], with the 50-SMA also falling below the 100-SMA in a bearish crossover. This technical configuration suggests a potential continuation of the downtrend.
However, the oversold RSI (26.16) indicates a potential short-term correction or bounce. If bulls can regain control, the initial hurdle lies at the 1,826 cents resistance level. A sustained break above this level could signal a short-term reversal, with the major resistance at 2,010 cents potentially coming into play.
Conversely, a failure to hold above the current level and a confirmed breakdown below the crucial support level of 1,613 cents could expose the share price to further depreciation. Significant selling volume on a break below this level would bolster the bearish case, potentially targeting 1,503 cents and the major support zone at 1,330 cents.
Summary
Pepkor’s outlook hinges on its ability to overcome the recent technical headwinds. The oversold RSI suggests a possible short-term bounce, but the overall trend remains bearish due to the breakdown below the key moving averages. Key levels to monitor include the 1,826 cents resistance on the upside and the 1,613 cents support level on the downside. A decisive break above or below these levels will provide a clearer indication of the stock’s near-term direction.
Sources: TradingView, Trading Economics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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