Asher Bohbot.      Picture: MARTIN RHODES
Asher Bohbot. Picture: MARTIN RHODES

EOH’s share price fell almost 7% to close at R125 on Monday, after the company said founder and CEO Asher Bohbot would step down at the end of June after almost 20 years at the helm.

Bohbot was expected to step down in the next two to three years, but given that the group has just embarked on an expansion in the rest of Africa, analysts were surprised about the timing of the announcement.

"We were quite surprised [by] the swiftness of the announcement and the length of the handover period," said the chief investment officer at Falcon Crest Asset Managers, Farai Mapfinya.

"While we expected that a time would always come for Asher Bohbot to hand over the reins, we are not quite sure about the timing."

Matthew Auerbach, portfolio manager at Capricorn Fund Managers, said: "We were disappointed by the surprise announcement, especially as the share had been weak after rumours about possible suspicious government agreements.

"When an entrepreneur who has built the business leaves, there is always uncertainty whether the new management will be as good."

Peter Takaendesa, portfolio manager at Mergence Investment Managers, said the market would "always [be] cautious when the founder of a business steps down, but we think Asher has prepared the business well to continue to grow sustainably under the remaining executive team and board".

Bohbot will rejoin EOH in 2018 as a nonexecutive director. Analysts have previously flagged Bohbot’s departure as a risk for the company, which has achieved tremendous growth under his leadership.

What could give the market some comfort is that he will be replaced by Zunaid Mayet, the CEO of EOH Industrial Technologies, who has been with the company for eight years.

EOH provides consulting, technology and outsourcing services. It has been one of the best-performing listed technology companies, with its share price surging more than 300% over the past five years. The stock is down 23% in 2017.

Mapfinya said the share had been under pressure as the market questioned the underlying performance of the business and its long-term growth prospects, given what it had delivered in the past and the relative size of the company now.

"The management depth is evident, but all the growth has come under Asher’s watch. Only time will tell whether the new structure will work and the successful, embedded culture be carried forward," he said.

The share had traded at a premium to the market and was priced for further blue sky, Mapfinya said. Bohbot’s departure would be a litmus test for the business, he said.

Acquisitions of medium-sized businesses over the past few years have grown EOH’s geographical reach to more than 20 countries in Africa and the Middle East.

This move is expected to offset the relatively mature South African market over the next five years.

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