PSG Group shares down in Capitec drama
THE STELLENBOSCH establishment was yesterday again rocked by a corporate greed scandal engulfing Capitec, with its holding company PSG Group’s share price reeling nearly 10 percent.
The JSE, still recovering from an “accounting irregularities” scandal that has left Steinhoff on its knees, closed the day 2 percent weaker.
Viceroy Research, which previously released a detailed report on Steinhoff underhanded dealings yesterday (turned its attention to Capitec. It accused the bank of running an elaborate money lending scheming likening it to a “loan shark”.
PSG hit back ant Viceroy and said Capitec’s corporate governance was world class.
“Viceroy’s report contains irresponsible statements creating unwarranted market turmoil. PSG Group will consequently ensure that an investigation be launched into such conduct, including trading in both PSG Group and Capitec shares in the period leading up to the release of Viceroy’s report,”’ PSG said.
PSG, which owns 30 percent of Capitec, established the bank in 1999 through the combination of several microfinance businesses, some PSG owned.
Since then Capitec has been the gem in the PSG investment group’s crown and remains its largest investment.
Asief Mohamed, the chief investment officer at Aeon Investment Management, said PSG’s shareholding in Capitec had done well for the group and delivered value for shareholders. “What Viceroy is doing is irresponsible and reckless. Capitec has always been transparent about their lending practices.”
“While we find Capitec’s stock to be expensive, the bank has done more for the unbanked black population than any other financial institution in this country and has done this by presenting a compelling value proposition,” Mohamed said.
Capitec has an 11 percent market share of clients earning between R10 000 and R30 000 per month and only a 2 percent market share of clients earning more than R30 000 per month.
Byron Lotter, a portfolio manager at Vestact said: “Investigative short sellers are not new… they are good for a market, because they act as an extra watchdog to misbehaving corporates.
“But at the end of the day, they are just taking a view, like the rest of us.”
In its 2017 annual report, PSG’s founder and chairperson Jannie Mouton said the group remained a proud shareholder in Capitec as the bank continues to pursue its strategy to be the best retail bank.
“It remains PSG’s largest investment comprising 47 percent of the sum-of-the-parts value’s total assets as at February 28, 2017.”
“While this is a significant exposure to a single company, we remain confident that Capitec will continue gaining market share and deliver impressive results,” wrote Mouton.
PSG Group chief executive Piet Mouton has also previously downplayed concerns related to the group’s exposure to and reliance on Capitec for growth.