Mixed fortunes so far for the JSE’s 2017 laggards
Two months into 2018, JSElisted companies that registered the most value destruction in 2017 are registering mixed performances.
Among the larger stocks that suffered precipitous declines, Consolidated Infrastructure and EOH have gained. Lonmin and Aveng are still shedding value.
Scandal-dogged EOH, which at one point in 2017 dropped 83%, has recovered the most, adding almost 11% in February. The technology group, once a market darling, is still 60% off its record high, reached in 2015.
The free-fall in November 2017 came a day after investigators from the Independent Police Investigative Directorate searched the home of Keith Keating, a director of three businesses owned by the group.
The company distanced itself from Keating, having also said that despite media reports there was no evidence of corrupt dealings with the state.
Peter Takaendesa, portfolio manager at Mergence Investment Managers, said there may have been some market overreaction, but losses came in the context of general pressure on South African equities.
“Investors take time to forget about those [corporate governance] issues.
“What they will have to do is rebuild confidence, which will take time,” Takaendesa said.
Consolidated Infrastructure Group has also firmed, gaining 4.5% so far in 2018. It plunged 57% on November 14 after it warned shareholders some of its large engineering projects were having worse problems than anticipated.
Its share price lost 84% over the year, making it the JSE’s second-worst performer.
The company has, however, gained since mid-February, when it received approval from bond holders to waive payments arising from a breach of its loan covenants in 2017.
The one-year extension, subject to numerous conditions, includes an independent business review of the group.
Vunani small and medium cap analyst Anthony Clark said management seemed confident it would be able to restructure in line with the requirements set by long-term lenders. Consolidated had only marginally breached its covenant, while its poor performance was limited to its Consolidated Power Projects subsidiary, said Clark.
Platinum miner Lonmin has fallen 25.57% so far in 2018, having plunged 57.29% at one point in 2017. It recovered significantly in December, when the company, along with Sibanye-Stillwater, announced a merger proposal. Lonmin has covenant waivers with its lenders until February 28 2019, conditional on the acquisition by Sibanye.
Construction group Aveng, which fell 86% at one point in 2017, has also lost a quarter of its value so far in 2018, weighed down further by the release of its full-year results this week, which disappointed the market.