'Another Steinhoff' rumour fuels property stock alarm on JSE

Jan 11 2018 13:28
Lameez Omarjee, Carin Smith and Jan Cronje

Cape Town - Property stock prices in general suffered a steep dip on the JSE on Thursday morning, before recovering somewhat by noon, on rumours that a US-based research firm was investigating a SA company. 

The sell-off of property stocks was fuelled by rumours that Viceroy Research’s next target is a South African property company, according to EasyEquities trading specialist Bryan Stewart. 

Viceroy Research released an exposé on Stellenbosch-headquartered global retailer Steinhoff in December, shortly after its CEO Markus Jooste abruptly resigned amid an accounting scandal.

Speaking to Fin24 by phone on Thursday, Stewart said the Viceroy rumours have made investors “nervous” and the sell-off has impacted the profits of the property companies, which have been performing well.

The SA Listed Property index fell by over 7% in early trade, before recovering to trade 1% down at 11:30. 

The PropTrax Ten, an exchange-traded fund that tracks the top 10 JSE-listed property groups, was down about 2% at 11:30. 

Some stocks, such as Resilient Reit [JSE:RES] fell as much as 19%, before recovering to trade 3.3% down at 11:30. 

Sentiment and rumours 

Stewart emphasised that the Viceroy investigation into an SA property group was “just rumours” at the moment. Pharmaceutical group Aspen, which also experienced a sell-off earlier this week on Viceroy rumours, has since recovered 7.8% of its share value after clarifying that it had had no contact with the US-based group. 

“This shows the importance of communicating to investors and providing clarity,” said Stewart. “This market move is purely driven by sentiment.”

Viceroy, which describes itself on its website simply as "a group of individuals that see the world differently" tweeted on Tuesday that it does not comment on any of its reports prior to publication.

"As stated, we are working on European, South African and US names for Q1 2018. We will not disclose any further details until publication," it said. 

Petri Redelinghuys, trader and founder of Herenya Capital Advisors, explained that, following the Steinhoff fallout and confirmation from Viceroy that it was gunning for more companies with exposure in SA and Europe, investors and asset managers were going through companies to identify risk factors. 

“No one knows exactly when [the report] will be released or which companies are involved. What happens is that people are looking through companies with exposure to SA and Europe,” he explained. 

He said investors were looking out for companies with a lot of debt, which had funded acquisitions via debt, and had made acquisitions outside of SA. If they find anything to be suspicious of, they sell off, he explained.

“The whole sell-off is driven by panic,” said Redelinghuys. “People are speculating about which is the next target. This is good, forcing the market to look at stocks and understand them.”

Simon Brown, founder and director of investment website JustOneLap.com, told Fin24 on Thursday that it was "comical and weird how quickly the traders are panicking".

"I don't think it is merited as one has no idea at this point which stock [Viceroy] referred to."

Estienne de Klerk, executive director at Growthpoint, meanwhile, told Fin24 that property stocks had a little run in December. This was due to the impact of things like the ANC election conference and the reduction in bond yields, which drove strong sentiment. 

De Klerk said it was important to keep in mind that the recent weakness is not entirely across the board.

"I think the very low yielding stocks have been more impacted," said De Klerk.

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steinhoff  |  viceroy  |  property  |  jse  |  stocks


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