The pep is back in the step of STAR's shares
Steinhoff Africa Retail’s (STAR) share price has recovered significantly following the bloodbath in December which saw its value and that of Steinhoff plunge on the local bourse.
Steinhoff is a major shareholder in STAR, which has a market capitalisation of over R70-billion, making it one of the country's largest non-grocery retailers. Steinhoff has hardly recovered after losing 90% of its value following revelations of corruption in its accounting processes, while STAR has recovered 23.5% since January as investors' fears about its involvement in the financial scandal wane and the outlook for its highly cash-generative key operations, PEP and Ackermans, looks positive.
STAR went from trading at about R23 to R15 on the back of the scandal, but slowly recovered to break the R20 ceiling.It closed 3.9% lower on Friday to trade at R19.70.
Casparus Treurnicht, a portfolio manager at Gryphon Asset Management, said STAR’s recovery was based largely on “all the signs that appeared suggesting that issues inside the Wiese stable were concentrated around Steinhoff”.
Treurnicht added he was one of many who took advantage of the sell off.
“At R15 it was a steal ... STAR’s share price was trashed and it offered value.”
Meanwhile, Ron Klipin, a portfolio manager at Cratos Wealth, said that if there was one business under the stable that was not expected to be under financial pressure it was STAR.
“It has good assets, with the exception of the mattress firm operation,” Klipin said.
“Although uncertainties remain of whether there are liabilities causing some of the market volatility.”
It would seem that STAR has largely distanced itself from Steinhoff in the eyes of investors and analysts, but, as a major shareholder, the trickle- down effect of the accounting scandal has not completely escaped STAR. Peter Takaendesa, a portfolio manager at Mergence Investment said that while there were a number of differences between STAR and Steinhoff at an operational level, Steinhoff’s problems had a significant impact on the STAR share price. STAR has underperformed compared to other clothing retailers.
“The underperformance of STAR is likely to be a function of investors’ concerns that Steinhoff is still the largest shareholder in STAR and may be a forced seller at some stage, as well as the uncertainty of how some of Steinhoff’s local operations interacted with STAR,” said Takaendesa.