Few fund managers have the courage to buy Steinhoff, even at R6.50. One who does is John Biccard, manager of Investec Value, which since the beginning of December has increased the Steinhoff weighting from 0.5% to 2.5%.
"There is talk that this is a fraud along the lines of [that of] the US energy group Enron," he says. "The difference is that nobody ever really knew how Enron made its money, while Steinhoff is made up of retail operations selling everyday consumer goods."
Biccard says that even if the accounting fraud has led to a R120bn hole, Steinhoff is still worth R29-R35/share — conservative, considering the break-up value. He is confident that Pep in SA, as a clean cash business, is still worth R50bn and the businesses that clone the formula, such as Pepco in Europe and Poundland in the UK, are of a decent quality. The French Conforama chain is second only in value to Pepkor.
The weak link, he says, is Mattress Firm in the US, which is worth about half the $2.5bn Steinhoff paid for it.
Biccard admits that there will be a binary outcome — either shareholders will lose all their money (they stand behind debt holders in terms of liquidation rights) or investors will triple their money.
Opportunities are made up easier than losses.