Once KAP gets rid of the Steinhoff stigma, it’ll fly

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THE BOTTOM LINE

Once KAP gets rid of the Steinhoff stigma, it’ll fly

Investors are watching closely as Steinhoff steadies itself to sell the remaining 26% stake it has in KAP

Ann Crotty


The executive team at KAP Industrial Holdings seem a bit frustrated with the Steinhoff stigma they can’t seem to shrug off. Unfortunately for them it may be several more months before investors begin to forget about the former close ties that existed between the two entities. Or rather, the ties that existed between key executives in the groups.
It’s also likely to be several months before Steinhoff sells the remaining 26% stake it has in KAP. That stake has been reduced from 60% in 2012 to nearly 40% earlier in 2018. In March Steinhoff sold 17% in a well-managed book build, which caused minimal disruption to the KAP share price and generated a useful R3.8bn for the troubled global retailer.
KAP has an attractive and substantial collection of well managed industrial businesses and its various African operations have sustained a solid performance despite tough trading conditions. For international investors keen to get exposure to Africa it looks like an ideal entry point. Uncertainty about economic growth in SA and in the rest of the continent might restrain demand in the short term.
And, then there’s the Steinhoff stigma. One analyst who tracks the group closely said he was waiting until Steinhoff sells off its remaining 26% before topping up his holding. He reckons that move will push the price down by about R1 a share, presenting a good buying opportunity.
That inevitable sale might also present the KAP executives with an opportunity to get more vocal on their growth prospects.

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