BROKERS’ NOTES: Buy Motus, sell Remgro

Chantal Marx, head investment research and content: FNB Wealth & Investments

Buy: Motus (MTH)

While the industry continues to face headwinds such as rising consumer prices, high interest rates, a weaker rand and load-shedding — valuations across the board are depressed. Importantly, Motus has a vertically integrated business model and is well diversified, which means weakness in new vehicle sales and the impact of a weaker rand on its import business will be softened by the car rental business (still benefiting from a strong return of tourists), used vehicles, and the very defensive and high-margin aftermarket parts business. Motus, along with its peers, was hit by a huge reduction in its fixed cost base during Covid — resulting in a significant margin uplift through the recovery. The stock trades on a forward p:e of five, which seems cheap and the technicals indicate solid near-term upside potential as the price skirts its 200-day moving average. Our target price is R123 with a tight stop at R98. Increase exposure for a break above R109.

Sell: Remgro (REM)

While still perhaps a solid longer-term hold, Remgro is starting to look full from a short-term perspective. The stock has returned close to 20% year to date, so it’s a good time to consider taking some money off the table. It is probably too early for an outright short but when considering dynamics within the major underlying holdings, we expect the next reporting period to be solid. You should see growth in banks and insurers offset by tepid growth in Mediclinic and weakness in the food and beverage producers within its stable. In particular, market share gains by AB InBev locally have captured our attention as it relates to the newly merged Heineken SA business — where teething issues related to the integration of the beermaker and Distell could put revenue (and by extension profitability) under pressure.