Steinhoff shares: What investment professional Piet Viljoen says about the prospects

Steinhoff shares: What investment professional Piet Viljoen says about the prospects
Steinhoff shares: What investment professional Piet Viljoen says about the prospects

As the name suggests, Steinhoff International is a multinational holding company. The South African roots still play a very important role. Some of the best experts on the scandalous group are therefore based in South Africa. One of them is Piet Viljoen from Counterpoint Asset Management in Claremont near Cape Town. In a recent interview on BizNews Power Hour, he gave his assessment of the outlook for Steinhoff shares.

The Steinhoff share is extremely tense

Various negotiations with plaintiffs and creditors are currently in the decisive phase. Steinhoff’s fate is to a large extent in the hands of judges. And whether shareholders end up with empty hands also depends on the negotiating skills of management.

Many investors are now betting on a break. When the way forward becomes clearer, management can focus again on creating value for shareholders.

And without your intervention, the important investments Pepkor and Pepco Group have developed very positively in the last few months. In addition, there is justified hope of further bolstering the balance sheet through a possible IPO of the restructured Mattress Firm, in which Steinhoff still holds around half.

But is that enough? Can Steinhoff really pull himself out of the swamp on his own tuft?

The most important statements by Piet Viljoen

Piet Viljoens Investmentgesellschaft holds so-called preferred shares of Steinhoff Investment Holdings. However, this is more like mezzanine capital, comparable to limited partner shares or convertible bonds that are secured with Pepkor shares. A small part of the income from the Pepkor stake flows through this route, but that is not the main reason why Steinhoff shares are too hot for him.

What to expect for the Steinhoff share in the event of liquidation

He foresees the following:

“Steinhoff has some pretty good assets, but they face a lot of debt and threatening litigation. The equity cover is therefore extremely thin. Every small setback can push them into negative territory. “

In particular, the efforts of the previous owners of Tekkie Town to have Steinhoff liquidated in order to get a slightly higher quota for themselves represent a very large risk for Steinhoff shareholders:

“In the event of liquidation, the assets will have to be sold faster than planned in order to serve the creditors and all the other preferred claimants. Then it becomes difficult to get good prices, which puts a strain on equity. Then there is a good chance that shareholders will get nothing. “

Viljoen also says that it was a negligent mistake to accept Steinhoff shares “out of greed” for the majority sold in the shoe retailer Tekkie Town instead of negotiating a possibly lower cash payment. You could have smelled the corpse in the cellar back then, given the visually excessive purchase price. Consequently, the responsibility is not 100% with Steinhoff.

We remember: Tekkie Town came to Pepkor in the fourth quarter of 2020, so Steinhoff is only indirectly involved.

The overall situation at Steinhoff

“It is almost impossible to make a reliable assessment of the balance sheet situation in view of the many valuation uncertainties with high volatility. There is a whole series of lawsuits, a possible liquidation, complex debts, assets in the sales process and all that. I wouldn’t want to be invested in that at this point in time. “

Is there still hope for the Steinhoff share?

“If management is given the opportunity to satisfy the claims of the plaintiffs and creditors over a longer period of time and in an orderly process, then there would be a good chance that something would also be left for the shareholders.”

Hope dies last

I take from the interview that the Steinhoff share has intrinsic value if the holdings continue to perform well, the judges are gracious and the creditors loosen their stranglehold a little.

But how big will this value be in the best case? Most recently, the market capitalization moved back in the range of 1 billion euros. That is more than some very healthy SDAX values.

As an investor, shouldn’t you insist on a better risk-reward ratio?

The article Steinhoff share: What investment professional Piet Viljoen says about the outlook first appeared on The Motley Fool Germany.

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Ralf Anders does not own any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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