15225 replies to this topic

[Polly]

 

Polly I cannot believe it that you simply cannot catch up with the times. Jooste has been out since Dec 2017 how many more years needed to get to understand SNH management is much different now!!!

 

 

stop believing....

 

Eskom has new management....ands whats up there?

 

do you think going down to all retails shops etc management not now tempted to steal as well??  This company has no control whatsoever...Each man for himself now...be it 1 pound or R1m pound

 

This is how business work my dad...seen it over and over again

Edited by Polly, 21 January 2019 - 12:03 PM.

[DayTraderDad]

carefull here guys: to systematically identify a company like Steinhoff with temporarily inflated accounting numbers , a corrupt Ceo, a fraudulent past history and tons of contingent claims against it,  should not be confused with value strategies that use a comprehensive approach in determining the intrinsic value of the underlying security.

Polly I cannot believe it that you simply cannot catch up with the times. Jooste has been out since Dec 2017 how many more years needed to get to understand SNH management is much different now!!!

 

[Tom]

Man famous for Steinhoff short:

https://www.moneyweb...2019-positions/

[Lionelza1]

Saving steinhoff is their job so we can't applaud them for that, so what great have they done so far? Nudda! They can't even keep to their own timetable and that's just pathetic... Is why I say they useless

I can't even say they saved this company from liquidation as this is not a fact!

[Lionelza1]

Thanks guys for the awesome views.

My play on steinhoff is absolutely and purely a GAMBLE.

So we seen the huge drop dec2017, I figured perhaps market overreacted there and decided to take that gamble thinking the market presented an opportunity to make some money when steinhoff recorrects itself.

What I have learnt thru this new management is that they are USELESS/LIARS in MY view. But yes this useless management have made great strides thus far in preventing liquidation, but by no means does in make it less riskier in parting with my money to play this share

I set a notification, if this share goes to 2.50, I log on, click sell, I am also prepared to lose 50% of my gamble.... I'm in play till April or until the juicy info is announced to be published FINANCIALS. So yes never long term on this..... My play

[Polly]

Good day Polly,

 

I had to think long and hard before responding - after all you are a respected senior member.  But, I beg to differ.  I believe that it is you who is erring.

 

I thought that the reasoning employed by Sarel in the article, the calculations he performed, and the conclusions reached were actually quite commendable.   It is of course possible that I have reached this position because his conclusions confirm my own independent calcs (hello Confirmation Bias!!).  I do agree that he may have overdone the EBITDA and his expectations of the share price appreciation is rather generous.

 

However, I believe that it is you who is exposed to Confirmation Bias with the chief culprits being the various Financial journalist (Ann Crotty and Stuart?). 

 

My understanding is that you are not a value investor.  As a result,  I would have though that all this volatility would have been like manna from heaven for you?

 

For all your rather articulate comments, and some of them are well reasoned, with respect, I do not see how you can objectively and using evidence of the financials and data provided reach your conclusions.   Would you please write out a case study and evaluation?  I would love a chance to review this and have a rebuttal if this is acceptable.

 

With Respect.

 

Best regards

Captainfrom82

 

 

 a very good evening to you to Captain

 

Thanks for some pretty good info/analysis on Steinhoff. Im sure most here are invested here and will feel a bit relieved . 

 

Firstly as a senior member makes no difference here. We have senior members calling other members con men, crooks, pumpers , dumpers and you name it.  Carefull what they will start calling you. 

 

Secondly no, one is erring , not me, not you or anyone else in this thread...That we will only know sometime in future who is right and who is wrong. In meantime all we doing now is giving views , opinions and advise.

 

Ok a little about myself very few know here.

 

1. Im an ex Chartered Accountant ( now retired ) and full time trader/investor.

2. I qualified in 1986

3. i bought my first share while serving articles in 1982 and have been investing from then on. Trading i took up about 10 years doing share cfds and then about 4 years ago trading the alsi

4. My first foray into Steinhoff was about 2008 when they bought off Unitrans and Steinhof was trading then at about R18.00/R20.00 a share. I looked at the AFS and believe me as a CA i could just not understand what the heck was going on. Everything looked too complicated and i just said no this investment is not for me. Well the goose came home to rest now it appears.

 

 

Ok back to the discussion here ....

 

Let me tell you one thing..I have never ever looked at Steinhoffs balance sheet/afs since 2008.Not the most recent one and not even the 1H figures. Also not interested in your figures or Carls who i presume is from Seeking Alpha. Those figures mean absolutely nothing to me. My view and conclusion is based on overall big picture outside financials. When you invest for over 35 years there is a thing called experience  which overrides everything else. You take this  experience, throw in a few repeated off balance sheet disaster questions to yourself  and combine it with the cleva money/dumb money trick and you can see where the company is heading. 

 

what are these questions.

 

1. did the company commit fraud. Yes. 

2. has the company got debt? yes tons of it.

3. Any contingent liabilities. More every day

 

Here you have a company which to me seems it main activity was to exchange gold for fake diamonds  ( other businesses were secondary in nature) 

You have a Ceo who jumps ship moment the news break which basically tells you the extent of the fraud committed

You have a share price collapsed from over R80.00 to R20.00 overnight and then down to R1.60 and hovers around here for months...So cant blame margin calls for drop in price as price would have made some recovery by now.

Company has assets no doubt , good or bad , profitable or loss making is hard to tell. At moment we know retailers from Sooth Africa to USA to UK are all suffering with most retail listed shares down about 30 to 40% especially USA and UK. and we know what space Steinhoff is in. Will they be any different?

 

and now they key..liabilities..this is where the uncertainty/risk is. Has this been quantified by new management? what about the contingent liabilities?

 

deal or not with creditors , i cant see this company surviving as all they will be doing is servicing debt for next 10 years if they survive that long. Debt will kill then off much before that. 

 

Your post on restructuring debt ( 5 points)  is basically telling me future looks bleak. None of those 5 points will ever work. 

 

 

 

and some points i picked up from your posts

 

The interest is NOT going to be serviced at an operational level.  They are not going to pay the interest, and you are not going to see this reflected in the Financials (neither the Income Statement, nor on the Cash Flow).  Rather, they are largely going to accrue the interest to the principle debt.

 

If this was left unchecked, it would have the impact of overstating earnings over the next 3 years, and balloon the debt.

 

 

 Please explain as i do not understand how the interest payable or accrual if not pai dwill not go through the income statement

 

 

 

However, I believe that it is you who is exposed to Confirmation Bias with the chief culprits being the various Financial journalist (Ann Crotty and Stuart?). 

 

mm for the record.

1. Who is Ann Crotty and Stuart..never heard of them

2. Not a Value investor?  Im a short term trader and long term investor who keeps away from penny stocks..besides JBL and AEG where i see lots of value for a good risk reward even if they fail.

2. Confirmation Bias.....I have traded 3 times in Steinfoff all shorts with 2 winners and one loser.  Last trade over 8 months ago.  Since then i have never traded it nor will i trade it in the fututre. I made this fact in the Steinhoff thread a few times.

 

I have no interest what so ever in Steinhoff , not a pumper or dumper but all im doing is giving advise/opinion on this thread to help forum members...I could be right or i could be wrong going forward but that is the uncertainty on investing. I have alwasy said to members do your own homework before you invest...Yes Captain you have done yours and if you feel you confident you buying value sure go for it.  My test of buying into this share as an investment:

 

If you invest here it has to be for long run right. Question or test is with all the uncertaintiry and risk:

 

Can you sleep at night peacefully after investing here.  If answer is yes , means you have done your homework. All i can say is good luck

 

If you cant sleep at night after investing here, get out....

[Polly]

This in a nutshell is why Trading technicals does not make sense. 

 

Share is current R1.80 = reaction is do not buy.

Share goes to R5.00 = reaction is now it makes perfect sense to buy

 

Note, this is exactly the same company, with exactly the same fundamentals.  This change in price could occur tomorrow or in 10 years - but the Technical Trader is waiting for the R5 signal.

 

And don't let me get started on the fact that the share price is not a perfect reflection of the value of the business.

 

But I guess, each to his.

 

Best Regards

Captainfrom82

 

 

Let me give my view on what your said Captain

 

 

This in a nutshell is why Trading technicals  make so much sense. 

 

Share is current R1.80 = reaction is do not buy.

Share goes to R5.00 = reaction is now it makes perfect sense to buy

 

Note, this is exactly the same company, with exactly the same fundamentals.

 

However at R1.80 it has a high element of risk/risk on..Greater  chance of more downside to Zero then break of R5.00

 

At break of R5.00 tells you risk off... greater chance of price going higher than back to lows. Follow the clever money

 

This change in price could occur tomorrow or in 10 years - but the Technical Trader is waiting for the break of R5 signal because he wants to follow the clever money/crowd / the investment houses.

 

The share price  will never be a perfect reflection of the value of any business when risk is on..The net asset value could be valued at R10.00 or forward price earnings could give a value of R10.00 at say P/E of 10  BUT...share price will never ever reflect that due to uncertainty. Markets dont like uncertainty. They will always discount it in price. The uncertainty going forward in Steinhoff cannot ever be underestimated. To me its a time bomb.

 

But I guess, each to his.

[Polly]

Dear Polly,

 

The 1H figures are not temporarily inflated.  I grant you that they are not audited.  However, they have been constructed very carefully.

 

I do not understand your point about a "corrupt CEO".  Who is this person to whom you are referring to?

 

Your concerns regarding the contingent claims are valid.  Thank you for this.

 

Best Regards

Captainfrom82

 

ok this is what i meant to say

 

 

carefull here guys: to systematically identify a company like Steinhoff with temporarily inflated last audited financial statements , a corrupt ex Ceo in M Jooste, a fraudulent past history and tons of contingent claims against it,  should not be confused with value strategies that use a comprehensive approach in determining the intrinsic value of the underlying security.

[Captainfrom82]

carefull here guys: to systematically identify a company like Steinhoff with temporarily inflated accounting numbers , a corrupt Ceo, a fraudulent past history and tons of contingent claims against it,  should not be confused with value strategies that use a comprehensive approach in determining the intrinsic value of the underlying security.

 

Dear Polly,

 

The 1H figures are not temporarily inflated.  I grant you that they are not audited.  However, they have been constructed very carefully.

 

I do not understand your point about a "corrupt CEO".  Who is this person to whom you are referring to?

 

Your concerns regarding the contingent claims are valid.  Thank you for this.

 

Best Regards

Captainfrom82

[Captainfrom82]

Christo Wiese had a highly leveraged position at the time and when the banks made the call there were forced sales. He would not have done this himself. It was reported on this way at the time. The fact that he held onto his 6.2 percent and has been adding is a positive sign

Sent from my SM-J111F using Sharenet Sharechat mobile app

 

Dear Seeking Knowledge,

 

Be careful.  You are applying reason and logic to reach a rational conclusion.  That will make you deeply unpopular.

 

Would you be so kind as to please try and be a little incoherent, illogical, emotive and prejudiced.  It will be received very well on the forum.

 

Best Regards

Captainfrom82

[Captainfrom82]

Point iam making for newbies....

 

 

Never get influenced by what you read or other peoples opinion before your invest..

 

 

Always do you own homework first......

 

 

My call still remains....Unless and until it breaks R5.00 to upside , its a big fat ZERO in my view...

 

This in a nutshell is why Trading technicals does not make sense. 

 

Share is current R1.80 = reaction is do not buy.

Share goes to R5.00 = reaction is now it makes perfect sense to buy

 

Note, this is exactly the same company, with exactly the same fundamentals.  This change in price could occur tomorrow or in 10 years - but the Technical Trader is waiting for the R5 signal.

 

And don't let me get started on the fact that the share price is not a perfect reflection of the value of the business.

 

But I guess, each to his.

 

Best Regards

Captainfrom82

[Captainfrom82]

wow...what a rosy picture being posted seeking alpha...So well put that you making me change my mind about Steinhoff...

 

wonder how many newbies going to start punting this one through this article hay...

 

Good day Polly,

 

I had to think long and hard before responding - after all you are a respected senior member.  But, I beg to differ.  I believe that it is you who is erring.

 

I thought that the reasoning employed by Sarel in the article, the calculations he performed, and the conclusions reached were actually quite commendable.   It is of course possible that I have reached this position because his conclusions confirm my own independent calcs (hello Confirmation Bias!!).  I do agree that he may have overdone the EBITDA and his expectations of the share price appreciation is rather generous.

 

However, I believe that it is you who is exposed to Confirmation Bias with the chief culprits being the various Financial journalist (Ann Crotty and Stuart?). 

 

My understanding is that you are not a value investor.  As a result,  I would have though that all this volatility would have been like manna from heaven for you?

 

For all your rather articulate comments, and some of them are well reasoned, with respect, I do not see how you can objectively and using evidence of the financials and data provided reach your conclusions.   Would you please write out a case study and evaluation?  I would love a chance to review this and have a rebuttal if this is acceptable.

 

With Respect.

 

Best regards

Captainfrom82

[Captainfrom82]

 

EBITDA: Earnings before interest, tax, depreciation and amortization.

And what about all other expenses, and court cases, and regulatory fines from all over?

 

What we know for now, is that Steinhoff is and has been making losses, and impairments.

The future is unknown, but according to the writer's estimates (speculative):

https://seekingalpha...ck-trail?page=5

These estimates (speculative): "Negative" (0.77 b eu), and "Conservative" (1 b eu) and "Positive"  (1.47 b eu) EBITDAs: these will translate to loss, given that one still has to deduct the interest, tax, depreciation and amortization, and huge impairments, court cases costs, losses in court cases (especially the class actions), and regulatory fines, in order to get the estimates profit/loss.

 

 

 

 

Hi Tom,

 

The normal expenses and cost of sales have already been factored into these numbers.  As I said before, his EBIT (note his calcs does not appear to be EBITDA) appear to be overly generous by approximately 25%.  I am a deeply conservative investor, so I usually build enormous margins of safety (eg. before Steinhoff's own Impairments Calcs, I performed an Impairments Sensitivity Analysis and decided that Impairments of 70% to 80% may be prudent.  As it turned out, Steinhoff's own 1H figures came in ballpark to this assumption.

 

The Court cases (I assume you are referring to the Litigation claims) are excluded.  These usually take a very, very long time to eventually reach a conclusion (which usually takes the form of an out of Court settlement).  Also, these figures typically are nowhere near the value claimed or the actual destruction of value. 

 

Regulatory fines are also excluded.  I have no idea of the values involved here.  However, unlike in Nigeria (and even they have settled MTN's suit for a fraction) , First World Regulatory bodies have very limited powers to impose huge fines.  Glencore's fine imposed in the US is < $5b and their operations dwarf Steinhoff.  Glencore is a Fortune 500 company.

 

You did leave out Taxes.  This is as yet unknown.  But the old adage that you only pay taxes on money you actually made applies.  So far, Steinhoff's revised figures are all negative.

 

Best Regards

Captainfrom82

[Captainfrom82]

Correction: the "Positive" EBITDA was estimated by the writer to be (1.37 b eu) for 2019.

 

And he's estimating the 2020 EBITDA to be between 1 to 1.2 to 1.5 billion Euros ( https://static.seeki...5719_origin.jpg ).

(I noted that he didn't divide USA branch estimates of earnings and ebitda and  by 2, because half of Mattress Firm was exchanged with the creditors, this will result in about 1.25 b.eu deduction from these estimated earnings and about 0.05 b.eu from the editdas).

 

I largely agree with his position, although I believe that he may be to optimistic in his calculations of both the EBITDA as well as his estimation of the expected share price escalation.

 

My own calcs reflect a significantly lower EBITDA after 3 years.  My calcs reflect an EBITDA of between € 736  and € 846 at an CAGR of 5% and 10% respectively. 

 

Best Regards

Captainfrom82

 

[seeking knowledge]

Thanks for the positive article. That's why I am long. The current Steinhoff executives are really very good and cannot be compared to their predecessor's. Most comments are on historical information and not forward looking. The business also does not need to pay down all debt. It will be operating at a much improved efficiency level as well so issues will be quickly visible and delt with. With the world under economic stress the stores in the Steinhoff stable will enjoy greater traffic than the higher priced rivals. There will be something to be paid as a settlement but it will not be in the next few years and may be 10 percent or so at best. Saying this it is good to hear dissenting views as like minded people will always look for confirmation of what they believe and a balanced view will be the outcome. As we get beyond the 2017/18 results and into trading results in 2019 the focus should move to a more positive position. Once the major investment houses see something will come out of the restructuring we will then see sustained share moves up taking the shorters out.

Sent from my SM-J111F using Sharenet Sharechat mobile app

[Captainfrom82]

Saw the EBITDA figure. About 1.1 to 1.2b EURO range.

So what about the c. 1b EURO interest annually?

 

The way forward go something like this...

 

The interest is NOT going to be serviced at an operational level.  They are not going to pay the interest, and you are not going to see this reflected in the Financials (neither the Income Statement, nor on the Cash Flow).  Rather, they are largely going to accrue the interest to the principle debt.

 

If this was left unchecked, it would have the impact of overstating earnings over the next 3 years, and balloon the debt.

 

However, Richard Heis (he is a seriously clever man) and his team plan to resolve this problem through a "restructuring".  Just how this is meant to take place is not yet clear although there is speculation. Obviously, like all Companies with debt, the usual remedies are applicable:

1. Trade the way out of debt (unlikely that Steinhoff's EBITDA will cover the cost of debt and have spare funds to pare the debt materially); or

2. A rights Offer - I disagree that this is prudent.  The current share price deeply undervalues the company and will result in the number of shares issued very likely being far more than the total number of shares currently in issue (4219m).  This will result in an unacceptably high dilution of earnings.; or

3. Or ask the creditors to be patient, accrue the interest to the principle debt, and trade as normal.  Do this for 3 years.   If/when the share prices escalates, it will make a debt to equity swop, or a rights offer result in less dilution in earnings.

4. Look at partners willing to buy a non-controlling stake in the various CGU, and if necessary, float these on the various exchanges across the world.  (This is a very possibly the way forward).

5. Sell various businesses (this is not sustainable).

 

It is a lot more complicated than this - there is an argument that the impairments are overdone and that this will see a degree of reversal over the following years.  The reason for this is that Steinhoff's WACC at the moment is very high due to the troubles of the past 18 months.  Therefore the business assets are actually worth significantly more than what is reflected, and this value should be realised over the next three years.

 

I cannot write too much about this, but make no mistake about it.  Despite what you read on ShareChat, Steinhoff holds some very good assets indeed.

 

Best Regards

Captainfrom82

[Polly]

carefull here guys: to systematically identify a company like Steinhoff with temporarily inflated accounting numbers , a corrupt Ceo, a fraudulent past history and tons of contingent claims against it,  should not be confused with value strategies that use a comprehensive approach in determining the intrinsic value of the underlying security.

[Captainfrom82]

Thanks for the info Captain! it all makes sense now

 

I guess things will only happen next month then......and the all important info in April, FY17, FY18

 

I must say i hardly check what the share is doing.....big change from last year....i use to be glued to my phone!

 

Thanks again for the info

Hi Lionelza1,

 

My apologies for the delayed response - been away for a while and I am catching up.

 

Just regarding your comment above, more especially the "I must say i hardly check what the share is doing", almost all the great investors tell you that this is probably a correct thing to do.  Certainly from a value investor perspective. 

 

If I remember correctly though, you are a trader - not a buy and hold investor like I am.  I cannot honestly say I understand traders.  I had an almighty arguement with Karin Richards on Twitter where we differed sharply about the reasoning and logic of trading on patterns.  I also have had some pretty robust discussions with friends, colleagues, and strangers online about trading and my skepticism.  For the record I am a Value Investor - I look for quality companies that are trading less than their value, I use a margin of safety by looking for a deep discount between the share price and the future earnings discounted to today's values.  When I identify these, I buy pretty big amounts and wait/hold.  I almost never sell unless I think the company is significantly over priced (and even then I would look at my after tax gain to see if this makes sense).

 

Good luck on your strategy.

 

Best Regards

Captainfrom82

[DayTraderDad]

Yes, Steinhoff will sue the respective directors, and the shareholders will also sue the respective directors, but these respective directors don't have that much money to pay, and we know that Jooste is currently liquidating his assets to pay back the loans due to the banks, and out of his (known) assets nothing will be left, and the insurance for these respective directors is ( capped ) which means it will not cover even a small percentage of the huge claims against them, and because they don't have that much money then the huge claims by Steinhoff and by the shareholders will recover just a small percentage of the losses.

And we know that the shareholders are going after Steinhoff as well, and so any small (capped) money they might recover will still have to cover the huge claims from the share holders against them as well, all that after high cost legal battles from and against all over.

I don't think all that money/assets has been lost quite sure has been hidden but it will be found because there are more people involved not just Jooste. Shareholders will not have much claim against SNH because how can a shareholder sue himself? The reason the share price fell was due to shareholders dumping the share so now a shareholder causes the price to collapse then wants compensation? So is Wiese going to sue himself? From what I have read from previous suites there is a claim if the board was involved and did nothing about it but in this case SNH board took serious action.

[Tom]

Tom my take is PwC by December was well aware of the full picture but due to the court cases quite sure they want to get all evidence together to facilitate prosecution to the correct individuals and also claim all moneys possible. There is much more required of the report than just financials. For me at the end SNH will also join the claim class action as a victim of fraud and will sue the respective directors for "PAY THE MONEY BACK"

 

Yes, Steinhoff will sue the respective directors, and the shareholders will also sue the respective directors, but these respective directors don't have that much money to pay, and we know that Jooste is currently liquidating his assets to pay back the loans due to the banks, and out of his (known) assets nothing will be left, and the insurance for these respective directors is ( capped ) which means it will not cover even a small percentage of the huge claims against them, and because they don't have that much money then the huge claims by Steinhoff and by the shareholders will recover just a small percentage of the losses.

And we know that the shareholders are going after Steinhoff as well, and so any small (capped) money they might recover will still have to cover the huge claims from the share holders against them as well, all that after high cost legal battles from and against all over.

Edited by Tom, 18 January 2019 - 12:33 PM.