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Strong trade in Steinhoff's STAR on JSE debut

Sep 20 2017 13:20
Carin Smith and Bloomberg

Cape Town - Steinhoff Africa Retail [JSE:SRR] - known as STAR - traded strongly on its first day of listing on Wednesday morning, Reuben Beelders of Gryphon Asset Management told Fin24.

He explained that STAR's share price opened at R21.75 and traded up to R22.46 before settling down to around R22.11 by midday.

The JSE told Fin24 that by mid-afternoon 46 281 650 STAR shares had traded. By then the share price was R22.03.

"At current prices that is a premium of around 8% to the price of R20.50 paid by those who purchased 750 million shares in the private placement," said Beelders.

"The discount and value retailers making up the core of the group obviously resonate with investors at this point in the cycle."

According to David Lerche, senior investment analyst at Sanlam Private Wealth, the initial positive market reaction to the STAR listing was expected given that the private placement was almost five times over-subscribed.

"The quality of the core Pep and Ackermans businesses is attractive to investors given the combination of defensive product mix, planned space growth and inflation pass-through," he explained.
"Investors should also benefit from the recovery off a low base of some of the brands from the old JD Group stable.”

In a statement issued on Monday Steinhoff,  said it would offer about 800 million shares at between R18 and R23 each.

STAR listed on the Broadline Retailers sub sector on the main board of the JSE. It is the 14th company to list on the JSE this year. STAR brings the number of Broadline Retailers listed on the JSE to six. This sub sector has a total market capitalisation of R91.5bn and contributes 1% to the overall market capitalisation of the exchange, according to the JSE.

STAR’s listing comes after the decision by Steinhoff International Holdings NV (JSE:SNH) to list the issued share capital of its wholly owned subsidiary on the JSE.

CEO's reaction

Ben la Grange, CEO of STAR, told Fin24 on Wednesday that the company is very happy and proud to have successfully listed STAR on the JSE, with early indications of healthy demand for the share.

"We continue to remain focused on delivering value to all of our customers," said La Grange.

“The decision to separate Steinhoff’s emerging and developed market retail businesses and establish STAR was a natural progression, given the business’ distinct strategic and geographic focus.”  

According to Prejelin Naggan, head of primary markets at the JSE, it is proud to provide a home to "such a significant retailer".

"This listing re-emphasises the great potential for growth that Africa continues to offer. This listing will give both local and international investors the opportunity to get direct exposure to the expanding African market for consumer goods through a liquid and well-regulated platform,” said Naggan.  

He added that the STAR Group is a retailer servicing the value-conscious consumer in sub-Saharan Africa and operates across sectors including apparel, footwear, household goods, furniture, appliances, consumer electronics and building materials, whilst also providing financial and mobile services.

Some of STAR’s well-known brands include Pep and Pep Africa, Ackermans, Bradlows and Incredible Connection.

Raising R18.4bn

Bloomberg reported earlier on Monday that Steinhoff Africa Retail is seeking to raise as much as R18.4bn in a sale of stock this month, the largest by a South African company in almost two years.

Naspers was the last SA company to raise more ($2.5bn in December 2015), excluding rights issues, according to data compiled by Bloomberg.

In August Steinhoff said it planned to spin off its Africa operations, while at the same time buying an almost 23% stake in Shoprite Holdings.

According to Bloomberg, the move enables billionaire Christo Wiese - the biggest shareholder in both companies - to combine his retail assets after a proposed merger fell through earlier this year.

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