#289: Steinhoff, where there's smoke

Simon Shares

Twitter poll for tonight's JSE Power Hour presentation ~ What's your expectation for the Top40 in 2018?

Time for my annual poll ..
What's your expectation for the Top40 in 2018 ?#JSE

— Simon Brown (@SimonPB) December 4, 2017

Markus Jooste has also quit Stenihoff (JSE code: SNH), Star (JSE code: SRR), PSG (JSE code: PSG) and Phumelela Gaming (JSE code: PHM) boards.

Steinhoff CFO and Star CEO Ben la Grange has quit as CEO of Star, but seemingly stays on at Steinhoff, for now.
It's an oldie but it always true. Where there's smoke theirs fire and locally that is Steinhoff. Forever people have been in one of two camps on this stock. They either loved it or didn't understand the financials and stayed well away. I have always been in the latter camp and recently the warnings have gotten dire and now the CEO is out, results delayed and an investigation by PwC to try and understand exactly what's happen.

Now hindsight is easy, but there has been a lot of smoke around Steinhoff for ages, enough to scare away any investor one would think. I warned as recently as a month ago about this.

For traders the lesson is simple. Don't try and catch falling knives. Sure sometimes it works but when it doesn't you blow up.

Wiese took some R122million SSF exposure in early November at 6146c. This is why we largely ignore director buying.
The company did a share buy back also in early November for about R4,8billion, now worth R1.2billion.

Also a lot of hating on ETFs as Steinhoff was 2.35% of the Swix (which is a truly horrid index) and 1.88% of the Top40. Frankly active fun damagers who liked the company probably had a lot more.

The 7th largest stock in the South African SWIX index is currently down 61% amidst accounting irregularities and resignation of the CEO. pic.twitter.com/NEqwrsBGwo

— Delphine Govender (@Delphine_DG) December 6, 2017

Of course everybody now wants to know if it is time to buy? The answer is no because we simple know nothing except that what we thought we knew is not true. Never blindly buy something where everything is simple unknown. Some saying they have 2500c odd value in Star, PSG & Kap, but then they also have debt that is likely about the same.

Viceroy Research has published their report in Steinhoff and it makes for scary reading.

Lastly, what to do if you hold Steinhoff? Sell. The 'it can't get worse' trope is a lie. It can get worse, it can go to zero.