I was asked whats my bet on the equity value of Steinhoff by DTD, I also wanted to share my opinion here to hear what you guys think as well:
There was an interview with the CFO last week where he said a rights issue is not even an option at the current share price level. I mean at the current share price they would need to issue 20 Billion shares to just get 1 billion € of fresh equity. This will not happen as the dilution would be huge and the number of shares in issue is limited to 17 Billion.
As mentioned before in my posts Steinhoff is pleading poverty. They are basically trying to show everyone that they do not have any value left in the company.
Examples:
- MF has been chosen to be equity accounted for. The value at the moment in the books lies at 9 Million €. However we all know that MF after Chapter 11 had an equity of around 1.5 billion $
- Conforama, Management knows that Conforama has a negative equity value of around 1.8 billion €. Why are they still consolidating Conforama. They could have made the decision to also equity account for Conforma. The decision was in the grey area according to IFRS. If Steinhoff would have equity accounted MF an additional 1.8 billion € equity would be on the books of Steinhoff.
- SA property portfolio and hemisphere. They have valued the properties way below current fair values if you have a look at the annual financial statements. Around 0.5 to 1 billion € to low.
- Pepkors share price is kept artificially low to show that its not worth anything. Also the mini issue of shares was to depress the price in my opinion. At the current share price Pepkor is trading at a EBITDA multiple of 5. That is a joke. Back when it was listed it was trading at an EBITDA multiple of 14.
- Deferral of the IPO of the Pepco Group. This was not because of Corona in my opinion. They are deferring this IPO because they know exactly they will obtain billions and people will be able to see what its worth actually. The growth potential of this company is enormous.
- They have written off basically all of their Goodwill (Just kept Pepkor and Pepco) and immaterial assets even though they where not required to. Again they where in the grey area and made the decision to write down billions.
- Material counter claims- have you noticed that no big claim has been launched against third parties? Yes, they have launched some minor cases against Jooste etc but the amounts where super low. Steinhoff can and will launch legal claims against auditors, banks other advisors etc. Watch out after the global settlement, they want to see how big the amount will be which they will use to draft counter claims.
- Tax related items- Have you heard of anything claiming back taxes yet? No, because they are also deferring this because all the write offs will lead to huge tax claims for prior periods. Watch out for this after the global settlement. They have just included the a disclaimer in the audit report that tax items still need to be solved surprise surprise.
- many more points to consider as well.
I think this month is the absolute best time to get this global settlement under the table. I cannot see them pushing the value on the books lower then it currently is. It was also no surprise to me that they have moved the announcement of HJ 1 2020 results to end of July. Also it was crucial that the first shareholder claim was won by Steinhoff last month.
Again this is just my personal view. We can only wait and see what happens. What do you guys think?
