Research archive for SNH

What the hell? JD Group and Steinhoff pounced a statement in the closing auction last evening in which parent company and significant shareholder, Steinhoff want to offer JD shareholders 1 Steinhoff share per 1.9 shares that they currently hold. It is an all scrip tender offer. It is key to note that they, Steinhoff have this offer open as of this morning to everyone who wants to tender their shares, they might get nobody, but I really doubt that, the premium is attractive, but we will definitely explore that later.

At the same time however, things must be much better in Europe, because Steinhoff released a trading statement saying that earnings for the interim period to end December are expected to be between 35 and 45 percent better. The stock traded at an all time high today. HEPS last time clocked 173 cents, expect around 240 odd cents for the half. Wow. Just wow. And that explains why the stock is trading somewhere in the region of 50 Rand, having doubled in less than a year after the company had made an exceptionally risky (at the time) purchase of European furniture maker Conforama. And now, the company has a larger market capitalisation than Nedbank. 4 March are their results, we will take a closer look then.

Steinhoff released a well received trading update yesterday, indicating that earnings are going to be between 20 to 25 percent better than the numbers reported this time last year. Results are expected to be released on the 10th of September, which is in two Tuesday's time. The middle of that range, 22.5 percent increase in HEPS translates to a number closer to 395 cents a share. So why does the share price hang around 30? 2944 has been the high today. And that is pretty close to the 52 week highs. You see, the stock over the last five years has never commanded a double digit multiple, the highest ever reached was 9.5 times. I know a lot of sceptics out there who will throw you a sideways look when you talk about this company, sceptical about the many deals, and the manner in which they are pulled off. We will have a closer look through the numbers when they hit the screens.

There was a fair sized announcement from one of the cheapest looking companies in our market, Steinhoff, yesterday. Voluntary announcement: Agreements concluded to acquire Kika-Leiner. If you want to get a sense of what it is that Kika does, check out their furniture ranges: Wohnen & Arbeiten. All looks good, I am pretty useless with identifying what makes a good couch and what does not make a good couch, I'll leave that to my wife.

Yesterday we had 6 month results for the period ending December 2012 from Steinhoff International. Wow there are a lot of moving parts here. This picture which I hacked from their website sums up the group much better than I could ever attempt.

Yesterday we got those full year results from Steinhoff which gives us some clarity on the business. Remember we covered the trading update Steinhoff trading update sizzles last week which indicated a 30%-35% increase in EPS and HEPS. The update also explained the makeup of the business with all it's moving parts so if you need a refresher check out the link.

We have liked Steinhoff for a while now on the basis that Europe is not going to be as bad as everyone thinks. This is because they have big exposure to the European consumer through their Conforama business and also why they look so cheap based on earnings. It is a complicated one to assess. Steinhoff have been very busy of late restructuring with the likes of JD Group and KAP. Before we look at the numbers let us try and understand what the Steinhoff structure actually entails.

Yesterday we had 6 month numbers from Steinhoff which showed a 48% increase in headline earnings per share. This was expected by the market and came in above the middle of the range given to us by the trading update a few weeks ago. This equated to 166.5c per share compared to 112.8c in the previous six months thanks to revenues of R37.6bn which was up a whopping 123% from the last period.

Steinhoff had a very pleasing trading update stating that headline earnings per share look to be up between 40% and 50% compared to the comparative 6 months ended 31 December 2010. This was due to the inclusion of Conforama, currency swings in their favour and earnings earned on the JD Group investment. The company made 108.6c in the comparable period. So the middle of the range 45% will gives us around 157.5c. The share trades at R26.77 and looking very cheap if we annualize this half. Hence the stock shot up 4.6% yesterday. But why is the stock so cheap? This growth has not all been organic would be my opinion but more by acquisition. We will have to take a closer look when the full results release comes out.

This one was even weirder, perhaps I am the only one here, but perhaps by the end you would understand my rationale. Steinhoff wants to take control of JD Group. They currently own 32.7 percent of the JD Group business. Now Steinhoff also own some KAP shares, it used to be only 34 percent up until last year. It is going to get complicated, so pay attention. Steinhoff swapped their PG Bison, Unitrans and Steinhoff raw materials business in return for "1 912.8 million (new) KAP shares at R2.50 per share", that announcement was on the 18th of October. "And .... KAP credit(ed) a loan account in favour of Steinhoff in an amount of approximately R4 139 million"

Steinhoff International released results for the year to end June 2011 yesterday afternoon. Marcus Jooste is definitely a smooth operator, and the business has done "great things" over the years. The business itself has lots of moving parts, and the recent acquisition in France and shuffling of their South African businesses, injected them into JD Group. Plus also, Steinhoff acquired the Polish business of JD Group. But that was really small, the acquiring of Conforama is basically business changing. Continental Europe now contributes 60 percent of all sales. Therefore, this is not by a country mile a South African business anymore, in fact Southern Africa contributes 21 percent to group revenue.

Steinhoff results for the six months to end December were released in the afternoon. This is a company that is about to transform into the second biggest furniture retailer on the planet. Read that line again. This is a company that deserves a whole lot of attention from ourselves. In my conversations with people about the stock I strangely sit somewhere in the middle. The reason I say strangely is that often we are more outspoken than other people on stock specific stuff, probably because we are business owners of the asset management function and do not work for a bank or financial institution.