Trellidor’s Shares Tumble: Security Breach or False Alarm?

Trellidor Holdings (JSE: TRL) faces operational challenges, evident in declining returns on capital employed (ROCE) and reduced revenue. With a ROCE of 11%, below the industry average, concerns arise from a five-year trend showing declining ROCE alongside reduced capital employed. The increased reliance on current liabilities (52% of total assets) further complicates the financial picture. Shareholders, seeing a 40% decline over five years, may seek improved metrics to regain confidence, especially as revenue dropped 2.1%. 

CEO Terry Dennison’s compensation aligns with industry norms, backed by Trellidor’s performance growth of 27% in earnings per share (EPS) and a 22% total shareholder return over three years. However, amidst revenue challenges, the focus at the upcoming AGM might shift to strategic steps for sustained growth. 

The stock’s price-to-sales (P/S) ratio of 0.4x remains slightly lower than the industry average of 0.5x. This ratio, tied to revenue trends, indicates investor sentiment and growth prospects. Trellidor’s recent revenue dip contrasts with its longer-term growth, reflecting a challenging market landscape. 

Technical Analysis: 

The week chart shows that Trellidor’s stock currently sits at 178 cents within a descending triangle pattern, trading under key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)]. The RSI trended lower to 40.56, indicating a bearish sentiment. 

Short-term opportunities might emerge towards the 160 cents support level upon continued downward pressure. A breakthrough could lead to a further decline towards 135 cents. However, short-term trading opportunities towards the 220 cents resistance level could arise should the price action fail to sustain a push lower. A break above the initial resistance and possibly a triangle could confirm the bullish momentum, likely bringing the 250-cent and 269-cent resistance levels within the bulls’ reach in the short term. 


Trellidor Holdings faces significant challenges, evidenced by breached debt covenants and declining financial metrics. Bearish sentiment persists as the price remains within a descending triangle pattern. Potential short-term downside targets are 160 cents and 135 cents, while a bullish reversal could test resistances at 220 cents, 250 cents, and 269 cents. 

Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, Datatec, IOL, MT Newswire. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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