{"id":469819,"date":"2022-11-19T09:00:14","date_gmt":"2022-11-19T07:00:14","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=469819"},"modified":"2022-11-19T09:01:27","modified_gmt":"2022-11-19T07:01:27","slug":"eoh-permanently-damaged","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/469819-eoh-permanently-damaged.html","title":{"rendered":"EOH “permanently damaged”"},"content":{"rendered":"

Prominent analysts and fund managers said it is difficult to build an investment case for EOH because of uncertainty about its earnings and looming rights issue.<\/p>\n

EOH released its financial results for the year ended 31 July 2022 recently, which showed a decline in revenue to R6 billion and a loss for the year from continuing operations of R160 million.<\/p>\n

EOH is also on the brink of technical insolvency, with its debt ratio at dangerously high levels and a shrinking asset base.<\/p>\n

To address its debt, EOH intends to go to the market to raise up to R600 million through a R500 million rights issue and a R100 million BBBEE deal.<\/p>\n

EOH CEO Stephen van Coller said the rights issue would leave the company with a fit-for-purpose capital structure and allow them to focus on growth.<\/p>\n

It raises the question of whether EOH is a good investment at these levels, considering its share price declined 98% over the last six years.<\/p>\n

Rowan Williams from Nitrogen Fund Managers (pictured above) is not convinced, saying permanent damage was done to the business and its prospects.<\/p>\n

Its brand and market position suffered, and as part of building a new balance sheet, EOH sold many assets and reduced the size of the business.<\/p>\n

\u201cThey have done a good job at cleaning up the business, but they have to reduce their overheads because EOH is now a much smaller business,\u201d he said.<\/p>\n

\"\"<\/a>

Jean Pierre Verster, Protea Capital Management founder<\/p><\/div>\n

Protea Capital Management founder and CEO Jean Pierre Verster said it is difficult to assess EOH because of uncertainty about normal earnings.<\/p>\n

He explained that the current earnings might not be sustainable. \u201cEOH has a lot of once-offs in their earnings, which makes it difficult to know what the sustainable earnings are,\u201d Verster explained.<\/p>\n

Another concern is that the rights issue can cause significant dilution. \u201cIt could be that the number of outstanding shares doubles which will be highly dilutive,\u201d he said.<\/p>\n

Verster said he would wait until the price of the rights issue is announced before assessing whether it is a good buy.<\/p>\n

\u201cIt is important to see how much dilution there will be and get a feel for the normal sustainable earnings,\u201d he said.<\/p>\n

\u201cUntil that point, EOH is like a dead man walking \u2014 the share price will just putter along as people wait for the rights issue to come.\u201d<\/p>\n

EOH said details about its rights issue would be posted to shareholders on 14 November 2022.<\/p>\n

EOH share price<\/strong><\/h2>\n

\"\"<\/a><\/p>\n

\n

This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0If you invested R100 in Vodacom and MTN in 2009, here is how much you would have today<\/a><\/h2>\n","protected":false},"excerpt":{"rendered":"

Prominent analysts and fund managers said it is difficult to build an investment case for EOH.<\/p>\n","protected":false},"author":341108,"featured_media":469829,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[80335],"tags":[6428,35,5724,82779,66174,82777,37913],"class_list":["post-469819","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-eoh","tag-headline","tag-jean-pierre-verster","tag-nitrogen-fund-managers","tag-protea-capital-management","tag-rowan-williams","tag-stephen-van-coller"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/469819"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341108"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=469819"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/469819\/revisions"}],"predecessor-version":[{"id":469827,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/469819\/revisions\/469827"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/469829"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=469819"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=469819"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=469819"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}