Has Telkom’s silver lining been found?

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*This content material is dropped at you by Sharenet

By Dylan Bradfield*

The drama by no means appears to stop in South Africa and none extra so for a beleaguered Telco firm Telkom, South Africa’s third largest cell phone operator.

This previous weekend, Bloomberg broke the story that the Public Funding Company (wholly owned by the South African authorities), former Telkom CEO, Sipho Maseko’s funding firm, Afrifund and Axian have been trying to make a proposal for presidency’s stake in Telkom.

The information itself met me with combined feelings. As talked about in my first Biznews Telkom podcast and article, the thesis was to see Telkom unlock worth via company motion round its property. With out sounding too sceptical, this deal appears very coincidental.

Learn additionally: FFM perception: Sharenet’s Dylan Bradfield – why TKG, BLU higher bets than VOD, MTN

Simply over two weeks in the past, the Telkom board scared the dwelling daylights out of shareholders by mentioning a possible impairment as giant as R13bn. Now there’s a “insider lead “consortium trying to scoop up a 35% stake at all-time low costs. It virtually jogs my memory of when Authorities offered R5bn of our strategic oil reserves on the backside of the oil market again in 2015, and the oil was offered under market worth.

So the place does this result in for all of the annoyed shareholders who’ve seen 44% of Telkom share worth destruction this 12 months alone?

Firstly, I discussed in my final article that authorities desires to push ahead funding of their Nationwide Well being Insurance coverage (NHI) program and that their Telkom stake had been earmarked as an preliminary funder for NHI. However we should ask why now? Why doesn’t authorities maintain out for the sale of the property and notice higher worth?

My instinct tells me that there’s extra occurring behind the scenes and almost certainly, some authorities officers will probably be making some hefty commissions on some shady handshakes. The flipside is that this may very well be a robust catalyst for a re-rating of Telkom’s share worth. With authorities out the way in which, the brand new “consortium” will probably be extra proactive in realizing worth for all shareholders, and sure assist re-establish the discussions with MTN for an outright sale.

Learn additionally: Each darkish cloud has a silver lining; will Telkom shareholders discover theirs?

If we mirror again to 2020, it was Sipho Maseko who confirmed a slide saying Telkom was price R100 a share. I’m not saying it’s price that, however it’s price noting that somebody who was as soon as that near the enterprise nonetheless sees the chance to revenue from a possible worth unlock situation in Telkom.

I had my reservations as to why the Board was so eager to impair the property so considerably. However now, we see why. As the most recent story does the rounds, it’s probably that speculators will push the share again as much as the R30 mark.

We’ll have to take a seat tight to see if this story involves fruition. For these Fantasy Fund Managers who listened to my podcast with Alec Hogg, and purchased Telkom on that week, you’ll probably see some nice outperformance, particularly versus MTN and VODACOM as per our authentic thesis. Pleased investing!