Steinhoff (SNH) ; Price Discovery - How we value Steinhoff
Summary
In the wake of the developments at Steinhoff (SNH), shareholders have found it difficult to assess the fair value of SNH. The FY17 financials are still outstanding, and prior year financials are also under review. Without reliable financial information and increasing risk of litigation, investors have found it challenging to assign a value to the share with some degree of comfort. The consequence of this breakdown in the market price discovery mechanism is share price movements that are highly volatile, with swings of more than 10% on some days.
We performed a detailed analysis of the SNH group structure, identified all the operating units of SNH (beyond management’s segmentation), and valued each of these units separately. With this break-up valuation approach, we use the theoretical total proceeds to discharge all known debt, and making some allowances for contingencies including off-balance sheet liabilities and potential class action suits. The net surplus should, in our view, be a fair approximation of the intrinsic value of SNH.
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