Click Group LTD (JSE: CLS) continued the recent positive trend in its share performance after rising over 0.76% on the Thursday trading session, reaching a month-to-date rise of 8.84% and a substantial year-to-date growth of 10.62%. This trajectory reflects a consistent upward movement, indicating investor confidence and positive market sentiment surrounding the company’s operations.
Fundamentally, Click Group is strategically expanding its retail presence. With plans to open 40 to 50 new stores and pharmacies in the upcoming financial year, Clicks, the retail-led healthcare group, aims to bolster its existing portfolio of 885 stores and 711 pharmacies. This expansion aligns with its ambitious target of establishing 1,200 new locations, reflecting a robust growth strategy. The recent acquisition of the 24-hour pharmacy chain M-Kem contributes to this expansion plan, potentially enhancing Clicks’ market presence.
Financially, Click Group’s performance for the year ending August 2023 demonstrates resilience despite market challenges. The company reported an 8.2% surge in turnover to R41.6 billion, primarily driven by a remarkable 12.2% growth in retail turnover. Despite facing an 11.4% increase in retail costs due to higher insurance premiums and diesel costs, the group managed a 9% rise in adjusted operating profit to R3.6 billion, strengthening its operating margin to 8.7%.
Technically Analysis
Click Group is currently trading at R298.51, marking a consistent upward trend over seven trading sessions. The price action exhibits a robust upward trend, trading notably above key moving averages (50-SMA, 100-SMA, 200-SMA).
However, recent developments, such as the 50-SMA (green line) falling below the 100-SMA (blue line) and 200-SMA (red line), might signal a potential short-term shift. The RSI at 72.77, indicating an overbought status, coupled with declining trading volume during the recent price rise, suggests a possibility of a corrective phase in the short term.
Short-term trading opportunities could exist towards the resistance level at R304.11 should the bulls sustain a push higher. A break above the initial resistance would likely bring the R317.05 resistance levels into play. However, short-term trading opportunities towards the R287.89 could arise should the bears intensify their fightback. A break below the initial support would likely bring the R276.82 support level within the bears’ reach in the short term.
Summary
Click Group displays strong fundamental growth potential with its expansion strategies and resilient financial performance. However, considering the year-to-date impressive share performance, investors should be mindful of the cautionary signals from the technical analysis, such as the overbought RSI and declining volume, which might indicate a potential short-term correction in the stock’s price movement.
Notably, resistance levels stand at R304.11, while immediate support rests at R287.89. A successful breakthrough above resistance may propel the price towards R317.05. Conversely, a bearish push below support could drive the stock to R276.82 in the short term.
Sources: TradingView, Trading Economics, AngloGold Ashanti plc, Dow Jones Newswire, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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