BUY: TFG
Discretionary retailer performance has lagged the broader market over several timeframes and some of the biggest names in the sector have delivered a close to 30% year-to-date decline, while the all share index has risen 16% so far in 2025.
We see scope for a broader rerating of the sector medium term, and we especially like the TFG business as a high-quality long-term pick. TFG is trading on a forward p:e of 9.9, well below its average levels historically. It also trades at a 12% discount to peers on this metric, where it has historically traded at par.
The 2025 financial year to end-March showed pedestrian growth, but trading momentum was positive with a strong second-half performance from TFG Africa. This was led by strong performances in womenswear, beauty and jewellery, as well as the Jet and Tapestry businesses, which benefited from the group’s credit, online and distribution capabilities. The first half of financial 2026 was off to a decent start with solid growth in the local chains and better performances from TFG London and TFG Australia (though still negative like for like) in the first eight weeks.
SELL: Telkom
South African telecoms operators have had a strong run over the past year. MTN is up 114% on a total return basis and Vodacom is up 47%, while Telkom has amassed a 165% return over the past year.
The valuation now looks stretched — the stock is trading more than one standard deviation above its long-term average rating on a forward earnings multiple and forward EV/ebitda basis and, importantly, now trades close to its NAV. Telkom’s turnaround has been remarkable, and we see scope for further strong cash flows. This could support a higher rating in the medium term, but it seems as if the easy money has been made, and we see potential for higher returns elsewhere.
Technically, the stock is trading in extreme overbought territory per the relative strength index (the current 14-day RSI is 86 vs 70 being overbought). This implies stretched momentum and raises the possibility of a pause or a correction in the near term.