Curro Shares Advance on Oversold Signal: Johannesburg Mover

Curro Holdings Ltd., which owns and operates private schools in South Africa, advanced the most in more than three months on speculation the stock’s double-digit slide this year is overdone.

The shares rose 9.5 percent to 10.99 rand, the largest one-day gain since Nov. 24, paring its decline this year to 8.4 percent.

The company’s 14-day relative strength index, which shows how rapidly prices advanced or dropped during a specified time period, was at 27 yesterday, the lowest since the company listed June 3. A reading of 30 or below signals to some technical analysts prices are set to advance from an oversold position. Stocks can stay at oversold or overbought positions for an extended period.

Curro fell 5.5 percent yesterday to a four-month low after saying it intends to raise 348 million rand ($47 million) in a rights issue.

“Although it’s good for the company in the long run, rights issues are never the best news for investors because they get diluted,” Byron Lotter, a portfolio manager at Vestact Asset Management in Johannesburg, said by phone. Investors are now seeing the opportunity to “get involved in the rights issue which will be at a really good discount to where the share is at the moment.”

Shareholders have been offered 36 shares for every 100 held at 6 rand per share, a 48 percent discount to Curro’s 30-day volume-weighted average traded price as of Feb. 27. The funds will be partly used to pay for “the rapid expansion” of its network of private schools, Curro said in a regulatory filing yesterday.

Curro’s Strength

“I think there is a huge gap in the market for cheap private education and that there are numerous options for acquisitions,” Lotter said. “Why I like Curro over its competitor Advtech is that they are targeting both high-end and low-end income groups.”

Advtech Ltd., an education, training and placement services company, dropped 0.3 percent today to 6.58 rand, retreating from yesterday record close of 6.60 rand.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE