By Peet Serfontein, Zimele Mbanjwa
Mondi is an international paper and packaging group, with production operations in over 30 countries. The group's key operations are in central Europe and South Africa.
Mondi tends to be resilient to economic cyclicality through its focus on corrugated boxes, which are primarily used in defensive sectors such as food, beverages, and fast-growing areas like e-commerce. The company is our preferred counter in the sector for the long term
Technically, a share that is in a well-defined price range presents an appealing investment opportunity (see the black parallel trendline on the main chart).
A well-defined price range is characterised by clear upper and lower boundaries, which are identified as resistance and support levels. The support level is the point at which buying is strong enough to overcome selling pressure and stop the price from falling further. Conversely, the resistance level is where selling pressure overcomes buying pressure, preventing the price from rising higher. In the context of a bullish trend, a price range can play a crucial role.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R470. This classifies our profit target of R379 as realistic
We suggest a low capital at-risk allocation to this trade.
Share Information
| Share Code | Mondi |
|---|---|
| Industry | MNP |
| Market Capital (EUR) | Paper & Forestry |
| One Year Total Return | 148.47 billion |
| Return Year-to-Date | 19.99%% |
| Current Price (EUR) | -5.01% |
| 52 Week High (EUR) | 335.84 |
| 52 Week Low (EUR) | 367.23 |
| Financial Year End | 274.98 |
| The share is building a base above its 200-day simple moving average a bullish takeaway. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (EUR) | 1.19 | 1.04 | 1.44 | 1.65 |
| Growth (%) | 12.77 | 38.44 | ||
| Dividend Per Share (EUR) | 0.77 | 1.21 | 0.84 | 0.75 |
| Growth (%) | -38.02 | 57.14 | 12.27 | |
| Forward PE (times) | 15.98 | 11.54 | 10.08 | |
| Forward Dividend Yield (%) | 7.30 | 4.52 | 5.08 | |
| While earnings are expected to show a pull-back in the short-term, growth is expected to rebound strongly over the forecast horizon. | ||||
Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | INL - Stop Loss (Close the position) | BAW - BUY (Continue to hold) | NPN - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 126.87 | 63.87 | 3095.26 |
| Current | 117.54 | 72.14 | 3330.40 |
| Movement | -7.4% | 12.9% | 7.6% |
| The share triggered a stop-loss, and the position was subsequently closed |
The share is trading at major support and remains of interest. Upside price momentum supports the trade strategy. Remains below its 200-day simple moving average.
Our take profit target remains at R75 with a trailing stop-loss level at R68. Exit the trade on 17 June 2024. |
Seems to be well positioned for a repetitive sequence in monthly performances. Upside price momentum is supportive. Remains above its 200-day simple moving average.
Our take profit target remains at R3633 with a trailing stop-loss level at R3115. Exit the trade on 8 July 2024. |
| Share Name and position | MRP - BUY (Continue to hold) | SNT - BUY (Continue to hold) | BTI - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 157.50 | 296.56 | 562.87 |
| Current | 162.42 | 285.01 | 543.75 |
| Movement | 3.1% | -3.9% | -3.4% |
|
A price coinciding with a trough in the business cycle remains of interest. The start of downside price momentum is a concern. Remains above its 200-day simple moving average.
Our take profit target remains at R213 with a trailing stop-loss level at R139. Exit the trade on 7 April 2025. |
An incomplete cup and saucer pattern remains of interest. The beginning of downside price momentum is concerning. Testing its 200-day simple moving average.
Our take profit target remains at R337 with a trailing stop-loss level at R280. Exit the trade on 29 April 2024. |
Testing the lower range of an inclining channel pattern. Fading upside price momentum raises some concern. Remains below its 200-day simple moving average
Our take profit target remains at R645 with a trailing stop-loss level at R540. Exit the trade on 22 April 2024. |
