Spur Corporation Ltd (JSE: SUR) has marked an impressive year, with its shares showcasing a robust performance, surging nearly 30% in the past twelve months. The catalyst behind this success can be traced to the full-year earnings report concluding on June 30, 2023, where the company unveiled a substantial 23% surge in turnover from its franchised restaurants, reaching an impressive R9.52 billion. Headline earnings per share (HEPS) witnessed a remarkable uptick of 81.1% at 261.18 cents, accompanied by a noteworthy 51.9% surge in profit before income tax, reaching R318.4 million.
This stellar performance is credited to the Spur brand’s volume growth, strategically positioned to seamlessly address customer convenience needs amid heightened instances of load shedding. The company’s successful marketing endeavours, including collaborations with the Springboks rugby team, further fortified its brand value. Notably, in response to the load-shedding challenges faced by South African consumers, Spur experienced substantial growth in takeaway sales, now constituting 15% of total restaurant sales. Leading this surge are the RocoMamas (47%) and Panarottis (35%) brands.
In adapting to the burgeoning trend of convenience, the company has strategically introduced three drive-thru’s, encompassing one Spur drive-thru and two RocoMamas drive-thru’s. While the company’s strategic positioning has earned it well-deserved accolades from investors, the shares have recently displayed a sideways trading pattern post the last earnings report, awaiting an additional catalyst to ignite a breakout.
Technical
On the 1D chart, the share price has emerged within an ascending triangle pattern, typically indicating a continuation of the current uptrend. However, the 25-SMA (green line) looks poised to cross below the 50-SMA (blue line), suggesting the presence of bearish shorter-term momentum that could prevent a breakout from the dynamic resistance of the triangle.
These multiple SMAs currently underpin the share price close to the support at R27.55. This is a strong level of support that could require an uptick in volume to enforce a sustainable breakdown. If the support holds, the share price could attempt to move above resistance at R28.16 and R28.76 on its way to the psychological resistance of the triangle at R29.03. The fate of the share price could be decided at this level, as a breakout could send it soaring toward the heights of R29.50 and R29.99.
However, another failure to break through this resistance could trigger profit-taking reactions from the market, potentially testing the triangle’s support at R28.16. A breakdown below the dynamic support could catalyse a retracement of the recent uptrend, with the Fibonacci midpoint and golden ratios at R26.24 and R25.36, respectively, being potential levels of interest in the longer term. However, support could be found at R27.01 and R26.54, potentially preventing the downturn from sustaining.
Summary
Spur Corporation has been rewarding its shareholders with lucrative returns over the past year and has found itself trending sideways in a triangle formation over the last two months. As we advance, the dynamic support of the triangle could be crucial in underpinning the share price toward re-attempting a breakout at the psychological resistance of R29.03.
Sources: Koyfin, Tradingview, Spur Corporation Ltd
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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