THE BOTTOM LINE
Get set for plenty of whipsaw action on Steinhoff shares
Volatile trading activity as investors vacillate between hopes of recovery and fears of steady demise
After a spike in the Steinhoff share price on Tuesday investors seemed to take a breather on Wednesday, perhaps worrying they may have overdone the optimism.
This volatility is likely to be the sort of trading pattern we’ll see from Steinhoff from now until the end of the year when the PwC report is due to be released.The share price will spike up and down as investors vacillate between hopes of recovery and fears of steady demise.
We can also expect to hear ongoing rumours of asset sales, some of which will be true. With €9.4-billion non-South African debt, generating an annual interest bill of around €400-million, and a collection of businesses that are struggling with tough trading conditions, the board might be tempted to try and realise some quick cash inflows.
But it’s difficult to see how asset sales will sort out its problems. In its presentation to lenders in May the board provided some indication of the marketability of the various businesses in Europe and the US.
The only assets to which values were attached were Steinhoff Africa Retail (Star) and KAP Industrial Holdings, both of which are listed. The estimated €3-billion attributed to Steinhoff’s 71% stake in Star may now be a little lower but should not be for long. The 26% stake in KAP was valued at around €0.4-billion.