Grim start to the year for South African tech shares

It’s been a grim start to 2020 for some South African-listed technology companies, which have seen their shares battered on weak earnings updates and negative investor sentiment over the dire state of the economy.

By far the worst performer so far this year – to Monday’s market close in Johannesburg – is EOH, which has fallen by a massive 63.5% since 1 January.

Investors are nervous about EOH’s prospects ahead of the publication of the group’s interim results on 7 April. In the past three years, the once high-flying share has plummeted by 97% as investors took fright at corruption in its public sector contracts, the debt load on its balance sheet and worries about whether its restructuring will bear fruit.

Software group Adapt IT has also had a terrible start to 2020, with its shares losing almost half their value – on top of a downward spiral last year, which has seen its share price collapse 66% in the past 12 months. Over five years, Adapt IT’s share price has fallen by a massive 85%.

The share sold off aggressively again this week after the group warned shareholders after markets closed on Friday that its interim earnings, for the six months ended 31 December 2019, would fall sharply.

Headline earnings per share could fall by as much as 51.7%, Adapt IT said in a trading update. However, on a normalised and comparative basis, the decline was much less precipitous – down by between 5.3% and 15.3% compared to the normalised Heps for the same six-month period in 2018.

Marked turnaround

Technology distributor Alviva Holdings also took a beating when it warned last week that Heps were expected to fall by between 33% and 41% for the six months to end-December 2019. Alviva, whose subsidiaries include Axiz and Pinnacle, has seen a third of its value wiped out this year so far – a marked turnaround for a share that was once regarded as a darling of the investment community.

Listed telecommunications companies have fared better than their IT counterparts so far in 2020, with MTN Group and Vodacom Group adding 5.4% and 5.6% respectively. Telkom – which saw its share price decimated last year – has fallen by 9%, while Blue Label Telecoms, which also had a grim 2019, has declined by 2.6%. Blue Label, which is the largest shareholder in Cell C with a 45% stake, will report its interim financial results for the six months to 30 November 2019 next Friday.

One share that has avoided the carnage is niche financial services technology provider SilverBridge, which on Monday delighted investors with a 184% improvement in profit. The market responded on Wednesday by pushing the shares up by almost 50%.  — © 2020 NewsCentral Media