Con­cerns about val­u­a­tion

Finweek English Edition - - MARKET PLACE - By Si­mon Brown

Af­ter hit­ting 2 100c a year ago, this stock has been mov­ing lower, trad­ing at 1 200c ahead of re­sults due at the end of May.

As I write this, we’ve had no trad­ing up­date and I don’t ex­pect the re­sults to shoot the lights out. The an­nounce­ment will also be ac­com­pa­nied by the de­tails of the rights is­sue to pay for Sygnia’s pur­chase of the five Deutsche Bank (DB) x-tracker ex­change­traded funds (ETFs).

The rights is­sue will re­sult in di­lu­tion and while the pur­chase makes lots of sense, it is be­ing done at a price-to-earn­ings (P/E) ra­tio of around 10 times. But Sygnia will surely drop the fees on the ETFs, mak­ing the pur­chase P/E higher?

I like its busi­ness model but have been con­cerned about the val­u­a­tion. Now we’re start­ing to reach a de­cent price, but I want the rights is­sue out of the way first. For those who al­ready hold Sygnia, I would con­tinue to hold as the worst of the sell-off is likely over, al­though I do ex­pect some more down­side over the next few months.

The rights is­sue will re­sult in di­lu­tion and while the pur­chase makes lots of sense, it is be­ing done at a priceto-earn­ings (P/E) ra­tio of around 10 times.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.