Altech shares in free-fall
JSE-listed ICT group, Allied Technologies (Altech), has dumped 20% of its share price since January 30th alone, despite the group announcing the disposal of its loss-making East African unit.
On Wednesday (6 February), shares in Altech slumped R3.11 or 8.15% to R35.07 on the JSE, having given up more than 5% on Tuesday (5 February), and suffering similar results the day before.
Altech has also slumped from a year best of R55.48, and a peak price of R79.99 in November 2009.
A busy year so far
Altech has had a busy time of late, having finally rid itself of its heavy bleeder, its East African operations, which the group announced on January 28th.
However, in the same deal that would see Liquid Telecom taking over the group’s relevant assets, Altech agreed to purchase an 8.6% stake in Liquid for US$16.5 million.
Several days later, Altech said in a trading statement, that it expects that its basic loss per share for the year ending February 2013 will be more than 200% higher and headline earnings per share are expected to be more than 20% lower, respectively, than in 2012.
Analyst view
Nadim Mohamed, investment analyst and partner at First Avenue Investment Management says that, whilst once solid performer with quality, high ROE companies in its stable such at Netstar and Autopage, “in recent years, some of these cash-generative businesses have shown slower growth rates and/or lower profitability.”
“This is due industry maturity, increased competition or deflationary price pressure”.
Mohamed notes that in order to renew corporate value, management embarked on a strategy of trying to unlock Africa’s connectivity opportunity.
“However, this has been largely value destructive – the west African business was losing about R2 million per month before it was sold and they invested over R1 billion into East Africa before it was almost given away to Liquid telecom,” he said.
The analyst underlined Altech’s loss in value through its NAV/share, down from 2,072 cents per share to 761 cents per share since 2008.
“As a result, we really have to question management’s stewardship of capital and ability to successfully create shareholder value from acquisitions. From an investor perspective, we think more needs to be done to justify the current conglomerate-type company structure.”
Positive signs?
Other analysts note that, while Altech has moved to try to diversify its earnings streams away from South Africa, it remains largely reliant on its locally based firms for profit.
That said, Altech’s exit from West and East Africa, could potentially see the company delivering an improved earnings performance someway down the line, with many of its other businesses performing satisfactorily.
In August last year, Altech signed a long-term agreement with Chinese ICT firm Huawei, to provide Huawei Enterprise products and services to customers and offer post-sales professional services and support.
Tech research firm Frost & Sullivan said of the deal at the time, that it would again strengthen Altech’s ambitions on the continent.
More on Altech
Altech disposes of East Africa ops
Altech shares slump amid interim loss
Altech offloads West Africa operation
Altech, Altron caned by East and West Africa
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