Telkom shares in healthy recovery after sell-off shock

PARTIALLY state-owned Telkom jumped 6.84 percent to close at R35 on the JSE yesterday, signalling that it had recovered from last week’s major sell-off.

Telkom fell to R29.85 a share on Thursday, the lowest level in six years following an aggressive sell-off by international investors.

The share price had a tumultuous year, having fallen from about R100 a share in June.

Peter Takaendesa, the head of equities at Cape Town-based Mergence Investment Managers, said yesterday that the stock was pricing in very optimistic outcomes early in 2019 and interim results disappointed later in the year.

“It seemed there were foreign shareholders who were not happy with the interim results and exited the company, resulting in the sharp share price decline last week,” he said.

Takaendesa said the share had a roller-coaster ride and had been under strain following the release of a weak overall financial position in the six months ended September 2019.

Takaendesa said the company was poised to boost the share price in 2020.

“The stock is starting the year off a low base. However, 2020 is likely to be a better year.

“The company will have to ensure that it manages its balance sheet going forward,” he said.

Last November, Telkom reported that profit after tax had had decreased to R939 million in the six months to September. This was mainly attributable to the 87 percent increase in finance charges and a 4.3 percent fall in earnings before interest, taxes, depreciation and amortisation to

R5 billion due to a significant increase in the costs associated with the mobile business growth, including a once-off cost of R132m relating to utilising two roaming partners in the first half of the year.

In December, the company, which is 40 percent state-owned, informed the market that its proposed takeover of debt-laden Cell C was off the table after receiving written notice from Cell C’s board of directors rejecting its non-binding proposal.

Commenting on the Telkom offer, Cell C said in December that it would consider all offers that took the full value of Cell C into consideration.

Cell C also said the company continued to prioritise its turnaround strategy.