EOH rally continues as confidence builds again

Investors continued to pile into EOH’s shares on Wednesday morning, with the stock reaching a high of R26.60 thanks to renewed confidence in the embattled technology group.

EOH’s shares closed 55.2% higher on Tuesday after the company reported an interim loss of R3.3bn due to impairments and said it would raise R1bn through asset sales to reduce debt.

On Wednesday morning, the stock was up as much as 31.8% at R26.60 but gave up some of its gains to end the day 13% higher at R22.80.

Nevertheless, the share has lost ground in 2019 so far and remains well below the highs of R171 reached in December 2016.

Cratos Capital portfolio manager Ron Klipin said EOH had “significantly improved disclosure”, which helped ease investor concerns.

UNFOCUSED GROWTH

New CEO Stephen van Coller “did not mince his words that although the turnaround was under way, the second half would be tough”.

“The previous entrepreneurial management appeared to go for growth in a unfocused manner, paying up for acquisitions without consideration of the structure and strategy of the emerging EOH entity,” Klipin said. “Van Coller, with fresh eyes, having come from outside the organisation and a having a good understanding of the cor- porate world, would appear to have the ability to overcome many of the challenges, aided by a new and experienced management team.”

REPUTATION

To repair the company’s battered reputation and stamp out wrongdoing, Van Coller launched an internal investigation into EOH’s past bids for government contracts, one of which was said to have cost the company its partnership with Microsoft.