German tax probe hits Steinhoff share on JSE
Market is overreacting ahead of Frankfurt listing, say analysts
STEINHOFF International suffered a setback on the eve of its much-anticipated listing on the Frankfurt Stock Exchange in Germany tomorrow.
The furniture retailer lost as much as 11% of its market value on the JSE on Friday, equivalent to about R35-billion, before the share pared some losses to settle 7.23% weaker at R77.
At the centre of the sell-off was the revelation that a tax investigation was being done into a subsidiary’s affairs.
Steinhoff said in a statement that German authorities had raided the offices of Steinhoff Europe Group Services GmbH on November 26 and were reviewing the balance sheet treatment of certain transactions.
The statement was thin on detail and the company could not be reached for comment.
“My gut feeling is that the market is overreacting. Steinhoff is still a great business and I don’t believe this announcement should influence one’s decision to hold the counter,” Rand Swiss portfolio manager Gary Booysen said.
“This is especially true when you consider the company’s ambition to become one of the world’s largest discount retailers,” Booysen said.
Steinhoff, which has a market value of about R294-billion, bought Pepkor Group earlier this year to expand its retail exposure to the growing discount markets in Africa, Europe and Southeast Asia.
The company also owns industrial businesses in Southern Africa through supply chain solutions and passenger services, timber products and manufacturing operations across diverse industries.
Momentum SP Reid Securities analyst Alex Sprules said Steinhoff was a large and complex entity and management treatment of the technical issues could understandably require further scrutiny by the tax authorities.
“At this stage, there is no way of assessing the seriousness or otherwise of the situation. Management has, however, offered all the help it can to the authorities, and this is a positive sign,” Sprules said.
Steinhoff said the German subsidiary was co-operating with the investigation and had taken steps to clarify and resolve the matter.