JOHANNESBURG STOCK EXCHANGE – JSE fell to a six-week low on Wednesday 07 December, in an action-packed session dominated by the speculator collapse in the share price of Steinhoff after long-serving CEO Markus Jooste quit amid fresh claims of accounting irregularity.
Steinhoff slid a record 59.3% to R18.58, wiping out a whopping R116bn in its market value — a devastating blow to shareholders. For months, the consumer goods company has fended off allegations of dubious and unreported accounting practices.
Earlier in the day, the company said that new information has come to light, which relates to accounting irregularities requiring further investigation. “This is a bricks-and-mortar business with real sales and the question is — what is the true value of the business now?” said Craig Pheiffer, chief investment strategist at Absa Stockbrokers and Portfolio Management.
“One cannot answer that question with any amount of certainty as it requires assumptions on future tax rates, future revenue recognition, the outcome of litigation and, potentially, an appropriate exit-multiple [valuation] for the business.”
The poor sentiment around Steinhoff had ripple effects on Steinhoff Retail Africa and other associated companies, notably KAP Industrial.
“One of the reasons we owned Steinhoff was because of the management’s proven ability in turning around acquisitions. That has now changed; management has turned out to be a liability,” Vestact Asset Management analysts said in an e-mail note.
“The stink of the current scandal will probably hang around the company for years to come. You need to ask yourself, what will the company look like when this finally blows over? Will [its] huge store base still be relevant in an age of online shopping?”
Naspers, which is the biggest stock on the local equity scene, was off nearly 3%, continuing its consolidation in line with Hong Kong-listed Tencent, of which it holds about a third.
As a result, the all share was off 1.55% to 58,065.80 points at lunchtime, as industrial 25 index shed 2.68%. Big resource stocks were under heavy pressure, continuing their recent downward spiral.
However, banks provided a silver lining, pushing to a record high, as markets continued to bet that Deputy President Cyril Ramaphosa will win the ANC’s presidential race, to be held in just less than two weeks.
The global backdrop was similarly weaker, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng dropping 1.97% and 2.14%, respectively.
Naspers was off 2.7% to R3,424.99, but was still up 71% so far for 2017.
Steinhoff Retail Africa plummeted 21.46% to R19.32 and Shoprite shed 3.16% to R229.52. KAP Industrial Holdings was off 7.04% to R8.06.
Investment group PSG Group retreated 3.93% to R285.36 and Brait 4.85% to R42.37.
Anglo American shed 2.29% to R242.34, Kumba Iron Ore 2.37% to R317.77, and Exxaro Resources 6.77% to R143.48.
Standard Bank was up 2.18% to R184.43 and Liberty Holdings 2.45% to R119.35.
Source: Business Day Live