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Johannesburg - Shares at furniture retailer JD Group [JSE:JDG] slid by 1.85% on Tuesday, following news that international investment bank UBS downgraded the firm from "buy" to "sell", bypassing "hold".
This happened about two weeks after four JD executive directors, including executive chairperson David Sussman, sold over R20m worth of company shares - a move that may have suggested management was uncertain about the group's future prospects.
However, Sussman said at the time the shares sale were a mere coincidence; the directors did not discuss the matter but had to sell their options because they were due to expire.
Chris Gilmour, a retail analyst at Absa Asset Management Private Clients, said even though trading conditions remain tough for furniture retailers, JD Group wouldn't suffer more than its peers.
"Until we get a sustainable recovery, consumer spending will remain low. It's still going to be tough for them [JD Group]," said Gilmour. "Still, they should be able to benefit from lower interest rates."
Another analyst at a leading asset management company concurred, saying that the company may not be a strong performer at the moment, but could be a good long-term investment.
"We own the share because we think it has strong prospects for earnings growth over the next two to three years, mainly because of the low base it's coming from," said the analyst.
Broker consensus at I-Net Bridge rates JD as a "hold", with earnings yield forecast to grow from 8.94% to 12.84%. Dividend yields are expected to grow from 4.15% to 6.23% over the next two financial years.
- Fin24.com
