What is ailing EOH?

The company’s share price is the lowest it has been for a long time, attracting asset managers but raising questions

For new EOH boss Zunaid Mayet, who replaced founder Asher Bohbot in May, this year’s precipitous 34% share price plunge is due squarely to bad press.

Mayet is fuming about “defamatory” reports from investigative journalism centre amabhungane in April that linked EOH insiders — fatherand-son team Jehan and Danny Mackay — to Lunga Ncwana, a “shady” middleman in the SA Social Security Agency (Sassa) grants scandal.

“We’ve been very clear in our repudiation of the article and its insinuations,” says Mayet, who joined the company in 2009 and headed its industrial technologies division.

“We’ve engaged independent lawyers to come in and do a review [of] the facts in relation to the article. These have been presented to the EOH board and we’re satisfied that there is no truth [in them]. The articles are baseless,” he says.

The guts of the allegations are that Ncwana, a former ANC Youth League member close to social development minister Bathabile Dlamini, worked with Jehan Mackay to ensure EOH scored government contracts. EOH has earned R300m from Sassa-related work over the past eight years.

In return, Ncwana had allegedly been living in the Mackays’ R65m mansion in Fresnaye, Cape Town, which has spectacular views over the Atlantic seaboard.

But Mayet’s response to the allegations is one of defensiveness. He says he won’t “regurgitate” the claims; and the board hasn’t released the legal review to shareholders either. He does say, however, that EOH is now “reviewing” its “gov- ernance framework” to make sure there are “no gaps”.

“There are certainly heightened perceived levels of risk in doing business with the public sector, and against that backdrop we’re looking at [having] a dedicated governance risk compliance framework for all our public sector business,” he says.

But investors will probably take with more than a pinch of salt Mayet’s claim that the R8.7bn loss in share price value is due to a poison pen.

Certainly, EOH is not used to this sort of scandal. Until now, it has been one of the unsung darlings of the JSE, producing striking earnings growth of between 30% and 40% every year for at least the past decade.

It was in 2010 that EOH’S stock really took off, soaring from R10/share to its peak of R180 in August 2015 — a gain of 1,700% in less than five years.