Fallen but still at a premium
LONRHO, which looks determined to reclaim its status as a leading pan-African conglomerate, has seen a steady decline in its board and a primary listing in London, has shifted from levels around 800c in February last year to reach a low of 125c/share.
Its price has dwindled even though Lonrho has energetically bulked up the old Lonrho shell over the past two years. Group operations and investments now span several African countries and include junior mining, water production, infrastructure development, specialist construction, technology, hotels and aviation.
Some South African punters may view Lonrho as a cheap option on a long overdue African economic renaissance – perhaps arguing that at least two or three of the group’s interests should produce above-average returns. But the difficulty with such a presumption is at what Lonrho can be considered a cheap option.
There’s a major liquidity problem as regards the trading in Lonrho which means a glaring disconnect between its share price in SA and its London listed price. Last week Lonrho’s shares were trading at around 5,3p in London, which by the ruling British pound/rand exchange rate would infer a value of around 65c/share. Lonrho is trading buy-in premium even for the most enthusiastic Afro-optimist.
Despite its weak share price in London, Lonrho has managed to find backers willing to provide new capital. The group raised £15,6m in November 2008, which will shore up its balance sheet and buy time for fledgling projects to develop much-needed cash flows.
While Lonrho appears to be a hive of corporate activity and an irrepressible African force, excitable SA punters should per prices before delving in with vigour.