PSG Financial Services Ltd (JSE: KST) stands as a stalwart in the South African financial services landscape. However, as the year unfolds, PSG’s share price finds itself marginally lower, with a mere 2% downturn mirroring the broader trend in the South African Stock Market, where the All Share Index has dipped by 3%. However, this slight retreat follows a triumphant 2023, where PSG experienced a remarkable surge, boasting a 26% increase in share price.
Source: Trive – Koyfin, Nkosilathi Dube
Behind PSG’s steadfast performance lies a robust financial foundation, evidenced by its stellar results for the six months ending 31 August 2023. PSG’s most recent results painted a promising picture. All three of its core businesses – PSG Wealth, PSG Asset Management, and PSG Insure delivered double-digit earnings growth. PSG Wealth saw a notable 18% rise in recurring headline earnings, while PSG Asset Management soared with a remarkable 23% increase. PSG Insure also contributed significantly, marking a commendable 12% uptick in recurring headline earnings.
These formidable achievements culminated in PSG’s overarching success, with a commendable 21% surge in recurring headline earnings per share, underscoring the company’s adeptness in generating sustained value for its stakeholders. As PSG continues to navigate the dynamic financial landscape, its unwavering commitment to excellence and growth positions it as a compelling entity worthy of further exploration or investment consideration.
Technical
PSG Financial Services witnessed a notable shift in momentum this year, following its impressive gains in the previous year. The onset of selling pressure halted its upward trajectory, reflecting a compelling interplay of market dynamics.
Technical analysis reveals the emergence of a descending channel pattern, indicating a downtrend in the share price. This pattern gained validation with PSG’s recent breach below the 100-day moving average, accentuating the prevailing selling pressures.
Notably, the lower boundary of the channel acted as a pivotal support level at R14.11 per share, momentarily stemming the downward movement. Conversely, attempts to reclaim lost ground saw PSG’s share price surging momentarily past the 100-day moving average, only to encounter resistance at the channel’s upper boundary, notably at R15.49 per share. Subsequently, a retracement ensued, guiding the share price lower towards the 61.80% Fibonacci Retracement Golden Ratio, where a slight rebound manifested, providing temporary relief to investors. Market sentiment remains pivotal as investors monitor PSG’s price action. Upside momentum may find impetus towards the R15.49 per share resistance level, while renewed bearish pressures could see bargain hunters find interest around the Golden Ratio level or the R14.11 per share support level.
Fundamental
PSG Financial Services’ half-year performance, as reflected in the results for the six months ended 31 August 2023, underscores its steadfast momentum and commitment to sustained growth.
The firm’s core income surged by an impressive 15% compared to the same period in the previous year, reaching a commendable R2.90 billion. This remarkable growth was further underscored by a noteworthy 21% increase in recurring headline earnings per share, soaring to R0.38 per share. Moreover, PSG demonstrated its commitment to shareholder value by elevating its dividend per share by 23% to 13.5 cents per share, reflecting its robust financial health and dedication to rewarding investors.
In tandem with its stellar financial performance, PSG experienced substantial growth in its assets under management, which swelled by an impressive 19% to R375.9 billion. Notably, PSG Wealth and PSG Asset Management both contributed significantly to this expansion, with increases of 18% and 20%, respectively, reflecting investor confidence and trust in PSG’s expertise.
Despite the challenging economic landscape, PSG remained resolute in its pursuit of growth, evidenced by its continued investment in operations and people. Notably, technology and infrastructure spend increased by 12%, underscoring PSG’s commitment to innovation and efficiency.
Moreover, PSG’s strong capital cover ratio of 240% highlights its robust financial position and excellent liquidity, surpassing regulatory requirements with ease. This solid foundation, coupled with a remarkable return on equity (ROE) of 22.5%, underscores PSG’s ability to generate sustainable value for its stakeholders while maintaining prudent risk management practices. As PSG Financial Services continues to carve its path in the financial arena, its steadfast performance and unwavering commitment to excellence position it as a formidable player poised for continued growth and success in the ever-evolving market landscape.
Source: Trive – Koyfin, Nkosilathi Dube
PSG has shown consistent growth in net income over the past five years, reflecting its robust financial performance. This upward trajectory has not only bolstered its profitability but also propelled its return on equity to near a two-year peak. Such sustained growth underscores PSG’s resilience and strategic prowess in navigating the complexities of the financial services landscape. As net income continues its upward incline, PSG remains well-positioned to capitalize on opportunities and deliver sustained value to its shareholders, reaffirming its status as a formidable player in the financial services sector.
Source: Trive – Koyfin, Nkosilathi Dube
PSG’s upward trend in free cash flow over the past two decades signifies a robust financial foundation and operational efficiency. With free cash flow reaching its second-highest level on a full-year basis over the past two decades, PSG is well-positioned to seize growth opportunities, whether through strategic investments, expansion initiatives, or returning value to shareholders through dividends or stock buybacks. A healthy free cash flow not only enhances financial flexibility but also augments PSG’s ability to weather economic downturns and navigate market uncertainties, ultimately bolstering its long-term sustainability and value-creation potential in the dynamic financial services landscape.
Summary
PSG Financial Services showcases resilience with consistent growth in net income and free cash flow, fortifying its position in the market. Despite near-term technical challenges, support at R14.11 and resistance at R15.49 highlight potential points of interest, while its strong fundamentals suggest long-term value for investors.
Sources: PSG Financial Services Ltd, Business Live, News24, IOL, Koyfin, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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