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EOH share price makes dramatic turnaround, doubling in value in a week

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EOH Holdings’ share price has reportedly soared by more than 50 percent, doubling in value since Monday, 15 April 2019.

EOH Holdings’ share price reportedly closed the day with a rise of 55.23 percent on Tuesday, 16 April 2019, as the market cheered the JSE-listed technology services group’s plan to raise R1 billion by selling non-core assets to reduce its debt in the next 12 months. The company said it would also reorganise its operational structure into four distinct operating units to allow for “leaner and more agile core businesses with separate capital and governance structures.”

On Tuesday, 16 April 2019, the share price closed at R20.18, and the company continued to make a steady success as the share price soared and reached a high of R26.60 on Wednesday morning, 17 April 2019, going up as much as 31.8 percent.

The company was forced to sell these non-core assets after it reported an interim loss of R3.3 billion due to impairments. Although the company is making progressive steps in raising R1 billion to cover part of the loss, the share has reportedly lost ground so far in 2019, as compared to highs such as the R171 reached in December 2016.

EOH Holdings’ chief executive Stephen van Coller said the group had put behind the events of the past few months and was now focused on achieving a complete turnaround of the business.

“The period under review marks the dawn of a new era for EOH. The last six months, including events post-period end, have been extremely challenging for the group.

“However, we want to raise around R1bn by selling non-core assets in the next 12 months after we have completed a strategic review of the business and that will leave us with our core assets,” Van Coller said.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, has said, however, that EOH numbers were clouded by many asset write-downs and potentially non-recurring operational costs.

“It is still not clear what is the business’s true and sustainable operating profitability, given ongoing investigations and implications on key supplier relationships, as evidenced by the recent termination of their relationship with Microsoft.

“However, the strong share price recovery today [Tuesday] is coming after a sharp decline over the past year and investors are likely taking comfort from the announced intention to sell assets and reduce debt. This is important and preferred by investors as some may have been concerned that EOH was going to end up issuing dilutive new shares to reduce its debt,” Takaendesa said.

He added that the sustainability of the share price recovery was dependent on how successful the selling of those assets was, and improved cash generation in the business and lastly, no other major supplier terminating its relationship with EOH.

Abenathi Gqomo
[email protected]

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