Arm­chairs for crit­ics

Finweek English Edition - - Companies & Markets - SHAUN HAR­RIS

THIS COM­PANY HAS proved to be quite re­silient de­spite a large ex­po­sure to con­sumer spending. Share price per­for­mance has been flat in re­cent months and over the past year has lost 14,5%. That’s not bad, con­sid­er­ing the havoc in the South African and global mar­kets.

Part of Stein­hoff’s de­fen­sive strength is its wide global pres­ence: it op­er­ates in 15 coun­tries in Europe, the Pa­cific Rim and south­ern Africa. Around 55% of rev­enue is in cur­ren­cies other than the rand, mainly the euro, which has been stronger than the rand and the US dol­lar. That makes Stein­hoff a rand hedge without some of the neg­a­tive ef­fects of an off­shore list­ing.

There’s also the much-vaunted vertical in­te­gra­tion strat­egy, con­trol­ling the pro­duc­tion, dis­tri­bu­tion and sale of house­hold goods of­ten from the for­est to the mill, the fac­tory and the re­tail out­let. Con­sol­i­da­tion of that strat­egy in the Euro­pean Union saw a large in­crease in turnover over the past fi­nan­cial year.

But it’s a share in­vestors tend to love or hate. It’s dif­fi­cult to pin down why, but it seems con­nected to per­cep­tions of CEO Markus Jooste. He’s been do­ing an ex­cel­lent job run­ning Stein­hoff, as its most re­cent fi­nan­cial re­sults show. But it seems some don’t like his style. That’s not an em­pir­i­cal way to judge a share, but some­times per­cep­tions are all-im­por­tant.

If there’s one weak­ness it’s that Stein­hoff is seen as a one-man com­pany. How­ever, it has strong in­sti­tu­tional sup­port, in­clud­ing In­vestec As­set Man­age­ment, RMB As­set Man­age­ment, Old Mu­tual In­vest­ment Group SA and the Pub­lic In­vest­ment Cor­po­ra­tion as ma­jor share­hold­ers. There’s also Ger­man in­vestor Claas Daun. All see value in the share, and with Stein­hoff trad­ing close to net as­set value, it’s def­i­nitely a value play.

But it’s hard to get too ex­cited about its short-term prospects. With the pos­si­ble ex­cep­tion of the Pa­cific Rim, con­sumers in its other key mar­kets will re­main un­der pres­sure. When spending gets tight, fur­ni­ture and ap­pli­ances can wait.

Fur­ther out, though, a low earn­ings mul­ti­ple makes Stein­hoff look an at­trac­tive buy for pa­tient in­vestors.

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